azbil report 2012

azbil Group 2012 Sustainability Report

azbil report 2012

2012年4月1日

2012年4月1日

Azb

il Corp

oration

April 1, 2012

azbil report 2012 01azbil report 2012 03

On April 1, 2012,

Yamatake Corporation changed its name

to Azbil Corporation, and all Group companies

in Japan now have “Azbil” in their names.

azbil report 2012 02

● Cautionary StatementStatements made in this report with regards to Azbil’s plans, targets, and strategies and other statements without historical facts are forward-

looking statements about the future performance of Azbil Corporation and its subsidiaries. These projections are based on management’s

assumptions, intent, and expectations in light of the information currently available to it, and therefore these statements are not guarantees of future

performance. Due to various factors, actual results may differ from those discussed in this document. Such factors include but are not limited to:

1) General economic conditions in Azbil’s markets, particularly levels of capital investments.

2) Exchange rates, particularly between the Japanese yen and U.S. dollar and other currencies in which Azbil makes significant sales or Azbil’s

assets and liabilities are denominated.

3) Continued acceptance of Azbil’s products and services offered in highly competitive markets characterized by development of new technologies

and the advancement of the global economy.

● Financial data and financial statements have been prepared based on Japanese GAAP and amounts have been rounded.

● The names of azbil Group companies are written with new company names as they have changed their names on April 1, 2012.

● Handling of products and services introduced in this report differs by country or region.

Note: Overseas azbil Group companies completed name changes in 2009.


Five years have passed since the azbil Group adopted

the Group philosophy, “human-centered automation,”

and symbol, “azbil,” to represent this philosophy.

　We have united our brand and Group companies both

in Japan and overseas under the “Azbil” name in order

to enhance the value we provide to our customers and

to achieve greater business growth as a unified group.

　The azbil Group is working together in its commitment

to being a corporate entity that is fully capable of

generating new value and solving a myriad of problems

together with its customers at their sites through its

steadfast pursuit of “human-centered automation.”

New company name

Azbil SecurityFriday Co., Ltd.

Azbil Kimmon Co., Ltd.

Azbil Kimmon Aomori Co., Ltd.

Azbil Kimmon Wakayama Co., Ltd.

Azbil Kimmon Shirakawa Co., Ltd.

Azbil Kimmon Shirasawa Co., Ltd.

Azbil Kimmon Aizu Co., Ltd.

Azbil Kimmon Haramachi Co., Ltd.

Former company name

Yamatake Corporation

Yamatake Control Products Co., Ltd.

Yamatake & Co., Ltd.

Yamatake Friendly Co., Ltd.

Yamatake Care-Net Co., Ltd.

Safety Service Center Co., Ltd.

SecurityFriday Co., Ltd.

Kimmon Manufacturing Co., Ltd.

Aomori Manufacturing Co., Ltd.

Wakayama Seiki Co., Ltd.

Shirakawa Seiki Co., Ltd.

Kimmon Shirasawa Co., Ltd.

Kimmon Aizu Co., Ltd.

Kimmon Haramachi Co., Ltd.

Kimmon Karatsu Co., Ltd.

Kimmon Environment Equipment Co., Ltd.

Hokkaido Kimmon Construction Co., Ltd.

Tohoku Kimmon Construction Co., Ltd.

Yamatake Mizuho Co., Ltd.

Royal Controls Co., Ltd.

Taishin Co., Ltd.

Azbil Corporation

Azbil Kimmon Karatsu Co., Ltd.

Azbil Care & Support Co., Ltd.

Azbil Yamatake Friendly Co., Ltd.

Azbil Trading Co., Ltd.

Azbil RoyalControls Co., Ltd.

Azbil Taishin Co., Ltd.


Azbil Kyoto Co., Ltd.

Azbil Kimmon Engineering Co., Ltd.


Group Philosophy

The azbil Group strives to realize safety, comfort,

and fulfillment in people’s lives and

contribute to global environmental preservation through

“human-centered automation.”

To realize this,

We create value together with customers at their site.

We pursue our unique value based on the idea of “human-centered.”

We think towards the future and act progressively.

A Company Shaping the Future with Automation

Making Automation More and More Human-Centered

The word automation brings a cold,

mechanical impression to mind.

But at the heart of the automation provided by the azbil Group,

there are always people.

The azbil Group is growing and changing so that,

working together with you, we can continue to provide new value

by bringing the benefits of automation

closer to people than ever before.

Four Core Values Provided through

human-centered automation

This is azbil

02 azbil report 2012 azbil report 2012 03

Group Philosophy

The azbil Group strives to realize safety, comfort,

and fulfillment in people’s lives and

contribute to global environmental preservation through

“human-centered automation.”

To realize this,

We create value together with customers at their site.

We pursue our unique value based on the idea of “human-centered.”

We think towards the future and act progressively.

Making Automation More and More Human-Centered

The word automation brings a cold,

mechanical impression to mind.

But at the heart of the automation provided by the azbil Group,

there are always people.

The azbil Group is growing and changing so that,

working together with you, we can continue to provide new value

by bringing the benefits of automation

closer to people than ever before.

ComfortSafety

Contributionto Global

EnvironmentalPreservation

Fulfillment

Four Core Values Provided through



This is azbi l

ComfortTo live and work healthily, in safety.

Safety● Measuring equipment that detects malfunctions invisible to the naked eye, emergency response programs, and facility monitoring systems play a role in the safe, accident-free operation of manufacturing facilities in plants and factories.

● Various systems, including those that manage access, automate dangerous work processes, and detect microorganisms, enable the safe operation of facilities and safeguard people who work in offices, shopping centers, or factories.

● Production to supply of food, water, electricity, and gas provided to homes is managed in an integrated manner.

● Whenever a health concern arises, a specialist will respond any time, 24 hours a day.

ComfortSafety



Fulfillment

The Value the azbil Group Provides

azbil report 2012 0504 azbil report 2012

This is azbi l

ComfortTo live and work healthily, in safety.

ComfortSafety



Fulfillment


To always live and work in comfort. ● Measuring and analyzing indoor air environments in offices, factories, and homes, then adjusting temperature and humidity and removing dust and pollen create comfortable living conditions with minimal temperature differences between areas.

● Automation technologies boost work quality and efficiency, which in turn improve productivity and quality and lead to enhanced customer satisfaction.

● Healthcare professionals provide health maintenance, nursing care, and other services that meet the expectations of customers and enable them to live comfortable lives.


azbil report 2012 03 azbil report 2012 02

Contribution to GlobalEnvironmental Preservation

ComfortSafety



Fulfillment

This is azbi l

To optimize the management and usage of energy. ● In buildings, energy is conserved by improving the operating methods of cooling or heating equipment, modifying air-conditioning or heating to match a building’s scale and purpose, and upgrading or renewing facilities.

● In the manufacturing process in factories, the key to reducing waste is maintaining a constant temperature and minimizing electricity, steam, and compressed air used in production facilities.

● We make visible when, where, and to what extent energy is being used, and then provide the best solution to save energy while maintaining comfort and quality.




FulfillmentComfortSafety



Fulfillment

This is azbi l


To create new value with the customer.● We create new value by working with customers at their sites to improve the operation of buildings and factories, enhance quality, conserve energy, and reduce environmental impact, which help to solve customers’ problems.

● We craft optimal solutions with comprehensive support throughout the facilities’ life cycle by promptly responding to each customer’s needs using our integrated structure that combines consulting, development, production, and maintenance.


Businessazbil’s Operations

This is azbi l

The azbil Group provides safety, comfort, and fulfillment and contributes to global environmental preservation through its three core businesses.

Building Automation Business

BA

Advanced Automation Business

AA

Life Automation Business

LA

The azbil Group realizes high performance and high quality through its in-house development and manufacture of a full product lineup, from building automation systems and security systems to application software, controllers, valves, and sensors. We offer solutions through an integrated structure extending from instrumentation design to sales, engineering, services, energy-saving solutions, and facility operation management. Using our original environmental control technologies, we contribute to creating spaces where people can work efficiently and comfortably while reducing the environmental impact.

The azbil Group strives to resolve issues in the materials, manufacturing, and assembly industries by delivering products, solutions, instrumentation, engineering, and maintenance services to support the optimum operation of equipment and facilities throughout their life cycle. Through collaboration with customers in manufacturing, we aim to develop advanced measurement and control technologies in order to provide production facilities that can safely deploy human capabilities and create new value for customers.

The azbil Group possesses measurement, control, and metering technologies cultivated over many years in the building, factory, and plant markets, as well as a personal commitment to customers through our services. We are supporting people’s active lives through operations related to lifelines such as gas and water, and lifestyle support such as nursing care and healthcare.

●Commercial buildings●Manufacturing buildings●Research laboratories●Clean rooms●Hospitals●Data centers●Government and　 institutional buildings●Schools●Hotels●Department stores●Shopping centers, etc.

●Petrochemical/chemical●Water supply and sewerage●Oil refining● Electric power and gas● Iron and steel●Shipping and marine●Semiconductor/ semiconductor manufacturing equipment● Electrical/electronic components●Machine tools●Automobiles●Pharmaceuticals● Food/beverage packaging

● Gas business operators● Municipal waterworks

departments, factories, managers of commercial buildings and condominiums

● Housing construction companies

● The elderly, nursing care providers, municipalities, health insurance associations

●Building management systems●User terminals●Controllers●Sensors●Valves and actuators●Security systems●Building preventative maintenance service●Total energy management service●Building operation support service●CO2 reduction solutions, etc.

●Monitoring and control systems and controllers●Solution packages● Field instruments● Valves and actuators●Digital indicating controllers●Recorders●Sensors and switches● Flame safeguard systems● Facility diagnosis equipment●Maintenance services● Factory energy conservation solutions, etc.

Net Sales by Business/Share of Total Sales Business Outline Markets Main Products and Services

¥103.9billion

46.1％

37.3％

¥32.5billion

14.4％

Note: Segment sales include intersegment sales.

¥84.1billion

● Various gas meters, safety and security equipment, regulators, system devices, various water meters, flowmeters, etc.

● Residential central air-conditioning systems

● Health and welfare services● Nursing care services, etc.

08 azbil report 2012

BusinessThe azbil Group provides safety, comfort, and fulfillment and contributes to global environmental preservation through its three core businesses.

Building Management SystemsOur systems provide overall building management and enable optimal control over building environments while reducing costs. We offer and build flexible systems that are tailored to specific applications as well as size and scope.

ACTIVALTM PLUSACTIVAL PLUS is an all-in-one control valve with built-in temperature sensor, pressure sensors, and flowmeter functions, which collects valuable but previously unavailable control data for more energy savings.

CO2 Management SystemsThese systems are internet services that provide support for measuring the volume of and managing all greenhouse gases emitted by an enterprise.

Monitoring and Control SystemsWe offer open, highly reliable systems tailored to the size and circumstances of the production facility, from large-scale systems to on-site operational supervision systems.

Digital Indicating ControllersOur controllers consistently afford the best possible control of equipment and facilities on site. We have developed a product lineup meeting multiple application needs.

ENEOPTTMpers Optimized Energy Control SupportThis solution package supports reduction of electricity usage by incorporating weather data and production plans to forecast power demand.

City Gas and LP Gas Meters and EquipmentWe offer intelligent gas meters, gas safety equipment such as gas leak alarms and automatic shut-off valves, and gas regulators, etc.

Nurse Phone-Anshin PendantTM Emergency Alert Response Service This mobile version of our emergency alert response service uses the Mimamori Phone offered by Softbank Mobile Corp.

Global Operations

The azbil Group is expanding its Building Automation, Advanced Automation, and Life Automation businesses internationally, backed by the technologies and expertise accumulated from domestic operations. The Group currently has overseas subsidiaries, affiliates, business offices, factories, and maintenance centers in 15 countries, principally in Asia. We deliver best-fit solutions for the differing problems and needs of customers in each region.

Note: Overseas sales figures are included within the sales of the Building Automation, Advanced Automation, and Life Automation businesses. Sales statistics denote figures from overseas subsidiaries and affiliates and direct exports. Indirect exports are not included.

Main Products and Services

¥19.8billion

8.9％Overseas sales ratio

Overseas sales

Azbil Control Instruments (Dalian) Co., Ltd.

Kikubari TM Residential Central Air- Conditioning SystemsThese systems provide comfortable temperatures throughout the home year-round and use an electronicair cleaner to remove house dust and pollen.

⇨For more detailed information on each business, see “Business Overview” on pages 29-40.

Zhuanqiao Factory,Shanghai Azbil Automation Co., Ltd.

★

Azbil Kimmon Technology Corporation


● Azbil CorporationLeveraging its measurement and control technologies, Azbil Corporation is developing the Building Automation business in the building market, the Advanced Automation business in the plant and factory markets, and the Life Automation business in lifelines, healthcare, and other markets connected closely with everyday life.

● Azbil Trading Co., Ltd.Proposes and sells a number of product lines and systems for control and automation, air environment improvement, data security, inspection equipment, and machine safety.

● Azbil Yamatake Friendly Co., Ltd.A special subsidiary of Azbil Corporation that provides employment opportunities to persons with intellectual disabilities.

● Azbil Care & Support Co., Ltd.Provides in-home services and designated in-home long-term care support under Japan’s Nursing Care Insurance Act. It also provides responsive services by healthcare professionals 24 hours a day, 365 days a year, including a preventative emergency response service, health consultation hotline, and specific health guidance.

● Azbil SecurityFriday Co., Ltd.Provides helpful software for solving security issues and other problems attributable to people that cannot be solved by technology alone.

● Hara Engineering Co., Ltd.Develops and manufactures user-friendly automated assemblers that fuse ergonomics with advanced mechatronics, a combination of mechanical and electrical engineering.

● Azbil Kimmon Co., Ltd.Researches, develops, manufactures, and sells gas and water meters, flowmeters, and instrumentation systems, and provides installation and other services. 　Azbil Kimmon Aomori Co., Ltd. 　Azbil Kimmon Wakayama Co., Ltd. 　Azbil Kimmon Shirakawa Co., Ltd. 　Azbil Kimmon Shirasawa Co., Ltd. 　Azbil Kimmon Aizu Co., Ltd. 　Azbil Kimmon Haramachi Co., Ltd. 　Azbil Kimmon Karatsu Co., Ltd. 　Azbil Kimmon Engineering Co., Ltd.

● Azbil Kyoto Co., Ltd.Core factory of the azbil Group that manufactures various types of flow measurement instruments, including electromagnetic flowmeters and battery-type electromagnetic flowmeter water meters. It also maintains a world-class flow calibration facility.

● Azbil RoyalControls Co., Ltd.Sells mainly the azbil Group’s industrial automation control instruments and provides engineering and other services for measurement and control systems.

● Azbil Taishin Co., Ltd.Develops, designs, and manufactures electronic control equipment, mainly for the azbil Group, which fulfills the needs of customers and the times.

● Tem-Tech Lab.Focuses on the research and development of technologies for high-value-added pressure sensors that are not suited for mass production.

Group Companies in Japan

Delivering Value as a Group Group companies both in Japan and overseas have adopted the “Azbil” name with the ultimate goal of enhancing the value we provide to customers. The azbil Group draws upon its collective strengths in order to deliver safety, comfort, and fulfillment as well as to contribute to global environmental preservation.

As a Group

azbil Group

Collective Strengths of the azbil Group


● Azbil Korea Co., Ltd.● Azbil Taiwan Co., Ltd.● Azbil Vietnam Co., Ltd.● Azbil India Pvt. Ltd.● Azbil (Thailand) Co., Ltd.● Azbil Philippines Corporation● Azbil Malaysia Sdn. Bhd.● Azbil Singapore Pte. Ltd.● PT. Azbil Berca Indonesia● Yamatake Environmental Control Technology (Beijing) Co., Ltd.● Azbil Control Solutions (Shanghai) Co., Ltd.● Shanghai Azbil Automation Co., Ltd.● Yamatake Automation Products (Shanghai) Co., Ltd.● Azbil North America, Inc.● Azbil Brazil Limited● Azbil Europe NVThese companies provide engineering, sales, installation, adjustment, and maintenance of and service for industrial automation and building automation systems and equipment.

● Azbil Kimmon Technology Corporation● Azbil Control Instruments (Dalian) Co., Ltd.● Azbil Information Technology Center (Dalian) Co., Ltd.● Azbil Hong Kong LimitedThese companies manufacture gas meters, control instruments, control valves, and switches and develop software solutions.

● Azbil BioVigilant, Inc.Develops technologies that can instantaneously detect microorganisms and manufactures products using these technologies for applications that require a clean environment in fields such as biotechnology, healthcare, and the environment. Four other affiliates

(Establishment/capital participation scheduled in fiscal year 2012)● Azbil Saudi Arabia Limited● Beijing YTYH Intelli-Technology Co., Ltd.● CECEP Building Energy Management Co., Ltd.

Overseas Group Companies

As a Group

azbil GroupThis is azbi l

(As of April 1, 2012)


18Executive Interview

With our sensitive awareness of needs at our customers’ work sites, we will create a business model with new added value.

23Feature: The azbil Group’s Global Operations

Poised for Global GrowthFrom building the foundation to a new stage

02 This is azbil

14 Highlights

16 To Our Stakeholders

18 Executive Interview

23 Feature: The azbil Group’s Global Operations

Our Operations

Business Overview

30 Building Automation . . . . . . Business

32 Advanced Automation . . . . Business

34 Life Automation Business

36 Global Operations

38 Business Foundation

Our Management

Management Framework

42 The azbil Group’s CSR . . . . . . . . Management

43 Corporate Governance

44 Risk Management and . . . . . . . . . Compliance

45 Board of Directors, Executive . . . Officers, and Corporate Auditors

Contents


29Business Overview

47

Our Management

Our Operations

Our Sustainabil i ty

41

Our Performance

59Financial Section

Sustainability

ManagementFramework

Our Performance

Financial Section

60 Financial Review

64 Consolidated Balance Sheet

66 Consolidated Statement of Income and Consolidated Statement of Comprehensive Income

67 Consolidated Statement of Changes in Equity

68 Consolidated Statement of Cash Flows

69 Notes to Consolidated Financial Statements

82 Independent Auditor’s Report

83 Corporate Data / Subsidiaries and Affiliates

84 Stock Information

Our Sustainabil i ty

Sustainability

48 Relationship with Customers

50 Relationship with Local Communities

51 Relationship with Suppliers

52 Relationship with Employees

53 Relationship with the Environment


HighlightsFiscal years ended March 31

Scope of financial data: Azbil and its consolidated subsidiaries

Scope of CO2 emission volumes: Azbil and its consolidated subsidiaries in Japan

Scope of total volume of waste generated: Azbil’s four main facilities (Fujisawa Technology Center, Shonan, Isehara, and Hadano factories), Azbil Kyoto, and Azbil Taishin

Overview of Consolidated Results for Fiscal Year 2011, ended March 31, 2012

With growth in both the Building Automation business and the Advanced Automation business, consolidated net

sales rose ¥4.3 billion, or 2.0%, year on year to ¥223.5 billion. On the other hand, despite efforts to minimize the

impact from the Great East Japan Earthquake and the Fukushima Daiichi nuclear power plant accident,

operating income decreased ¥0.5 billion, or 3.7%, year on year to ¥14.3 billion, with the impact of price pressure

and a rise in social insurance premiums. As for environmental indicators, we achieved a 12.2% year on year

reduction in CO2 emissions through our proactive efforts to conserve electricity during the summer.

Fiscal years

For the year:

Net sales

Operating income

Net income

Capital expenditures

Depreciation

R&D costs

At year-end:

Total assets

Total equity

Per share data (yen):

Net income per share

Net assets per share

Cash dividends per share

Financial indicators:

Shareholders’ equity ratio (%)

Return on equity (ROE) (%)

Dividend on equity (DOE) (%)

Environmental indexes:

CO2 emissions (Tons CO2)

CO2 emissions per unit sales

(Tons CO2 /100 Millions of yen)

Total volume of waste generated (Tons)

Final disposal rate (%)

2007

248,551

20,484

10,709

4,488

4,387

9,844

228,844

121,721

145.63

1,641.73

60.00

52.6

9.0

3.7

33,293

13.4

1,417

0.5

2008

236,173

17,832

9,525

6,414

4,503

9,636

220,846

124,984

127.87

1,672.91

62.00

55.9

7.8

3.7

30,138

12.8

1,484

0.6

2009

212,213

12,385

6,242

2,704

4,751

8,640

218,472

129,278

84.52

1,728.64

62.00

58.4

5.0

3.6

26,581

12.5

1,215

0.6

2011

223,499

14,348

8,519

3,010

4,027

8,816

223,476

135,077

115.35

1,808.48

63.00

59.8

6.5

3.5

23,549

10.5

1,145

0.3

(Millions of yen) 2010

219,216

14,896

7,928

3,302

4,460

8,953

217,501

131,362

107.35

1,754.86

63.00

59.6

6.2

3.6

26,831

12.2

1,111

0.8


0

20

40

60

80

6363626260

2007 2008 2009 2010 2011 (FY)

(%)(Yen)

0

1

2

3

43.7 3.7 3.6 3.6 3.5

Cash Dividends per Share (left scale) DOE (right scale)

Net Sales Operating Income/Net Income Total Assets/Shareholders’ Equity Ratio

0

100

200

300

223.5219.2212.2

236.2248.6

2007 2008 2009 2010 2011 (FY)

(Billions of yen) (Billions of yen)

2007 2008 2009 2010 2011 (FY)0

5

10

15

20

25

20.5

17.8

12.4

14.9

Operating Income Net Income

10.7

6.27.9 8.5

9.5

14.3

0

100

200

300

223.5217.5218.5220.8228.8

59.859.658.455.9

52.6

2007 2008 2009 2010 2011 (FY)

(%)

0

20

40

60

Total Assets (left scale)Shareholders’ Equity Ratio (right scale)

(Billions of yen)

0

3

6

9

12

15

2007 2008 2009 2010 2011 (FY)0

1

2

3

4

5

9.8 9.69.0 8.8

R&D Costs (left scale) Ratio to Net Sales (right scale)

8.6

4.0 4.1 4.13.9

4.1

(%)(Billions of yen)

Capital Expenditures/Depreciation

R&D Costs/Ratio to Net Sales ROE

(Billions of yen)

2007 2008 2009 2010 2011 (FY)0

2

4

6

8

Capital Expenditures Depreciation

4.44.5 4.8

4.54.0

4.5

6.4

2.73.3

3.0

(%)

2007 2008 2009 2010 2011 (FY)0

4.0

6.0

8.0

10.0

9.0

7.8

5.0

6.26.5

Cash Dividends per Share/DOE

0

10,000

20,000

30,000

40,000

2007 2008 2009 2010 2011 (FY)

(Tons CO2/100 Millions of yen)(Tons CO2)

0.0

3.5

7.0

10.5

14.012.8 12.5 12.2

33,293

30,138

26,581 26,831

23,549

CO2 Emissions (left scale)CO2 Emissions per Unit Sales (right scale)

10.5

13.4

CO2 Emissions/CO2 Emissions per Unit Sales

Waste Disposal and Final Disposal Rate

0

1,000

2,000

3,000

4,000

2007 2008 2009 2010 2011 (FY)

(%)(Tons)

0

0.2

0.4

0.6

0.8

0.5

0.6

1,484

0.6

1,215 1,111 1,145

0.8

0.3

Total Volume of Waste Generated (left scale) Final Disposal Rate (right scale)

1,417


To Our Stakeholders

Seiji OnokiChairman

Hirozumi SonePresident and Chief Executive Officer


In fiscal year 2011, ended March 31, 2012, the second year of our medium-term plan, the economy had

been expected to rebound steadily after emerging from the recession set off by the financial crisis that

began in 2008. However, a downturn in the Japanese economy was unavoidable in large part because of

two unforeseen events – the Great East Japan Earthquake of March 2011 and the floods in Thailand. We

would like to extend our deepest sympathy once again to the victims of these disasters.

　The azbil Group made an all-out effort to assist its customers in restoring damaged production facilities

and buildings, but our support was not limited to industry. We also assisted people in everyday life in ways

such as providing an emergency alert response service through local municipalities for disaster victims living

in temporary housing and in need of nursing care. “human-centered automation” is the azbil Group’s

philosophy, and one aspect of that is contributing to society through our businesses. We are happy that we

were able to practice that philosophy even in unforeseen circumstances like these. At the same time, we

were reminded that this is one of our key responsibilities. We will continue to do everything we can to

support the restoration and reconstruction of customer sites.

　Looking at economic trends in fiscal year 2011, the Japanese economy had begun to show signs of

recovery, but the pace of the recovery slowed due to the two disasters, exerting a substantial impact on

the azbil Group’s business environment. Financial instability in Europe and a slowdown in economic growth

in China and other countries in Asia as well as South America led to a strong sense of uncertainty about the

economic outlook. These large-scale disasters and changes in the economic landscape presented

challenges requiring urgent solutions such as improvement of supply chains, global dispersion of

production bases, and more efficient operation ranging from individual buildings to the regional level to deal

with electricity shortages. We see these and other current trends affecting the azbil Group not simply as

part of the economic cycle but as global changes in the economic structure. For the azbil Group, these

structural changes represent opportunities, and we intend to grow our business aggressively from a global

perspective, viewing the domestic and international markets as an integrated whole. To do that, we need to

continue to strengthen our foundation by accelerating the reform of our business and operational structures

based on the management foundation we have built up to now.

　With that awareness, we changed the company name on April 1, 2012, and at the same time changed

our management team to embark on this fresh chapter in our history as “Azbil Corporation.” Looking

ahead, we will continue to advance business structure reform (creating new businesses) and business

operation reform (creating new work styles) with an emphasis on flexible management that is responsive to

changes in market conditions. By pushing ahead with these reforms, we will make a qualitative

transformation in our businesses and broaden our business domains to grow into a world-class enterprise.

　In fiscal year 2012, ending March 31, 2013, the azbil Group will work together to be an organization that

creates new value with customers at their work sites and helps them to solve diverse challenges through

our pursuit of “human-centered automation.”

　We want to thank all of our stakeholders, including shareholders, customers, and local communities, for

their steady support and guidance.

July 2012

Seiji OnokiChairman

Azbil Corporation

Hirozumi SonePresident and Chief Executive Officer

Azbil Corporation


Executive Interview


With our sensitive awareness of needs at our customers’ work sites, we will create a business model with new added value.On April 1, 2012, the midway point of our medium-term plan for the “period of growth,” Hirozumi Sone took over as president and chief executive officer from Seiji Onoki, who became chairman. In this section, President and CEO Sone provides a review of recent business results and explains his strategies for the second half of the medium-term plan for the “period of growth.”

Question 01With the first half of the four-year medium-term plan now complete, what is your assessment of fiscal year 2011, ended March 31, 2012?

Operating income was down even though sales increased, so we still have some issues left unresolved. However, we made steady progress in structural reforms to strengthen our management foundation and are starting to see some results, so I think it was a year that positioned us for the years ahead.

In fiscal year 2011, the Japanese economy moved toward

a moderate recovery led by an upturn in exports and

manufacturing despite the substantial impact of the Great

East Japan Earthquake. However, these overall trends have

recently been weakened by concerns about a slowdown in

overseas economies and high crude oil prices, and the

outlook remains unclear. In overseas economies, recovery

continued in Asia, mainly in China, but financial instability in

certain European countries, a high unemployment rate in

the United States, and other factors raised growing

concerns of a possible downturn in those countries. In this

uncertain global economic climate, the azbil Group’s

operating environment also showed improvement in some

markets, but capital investment activity varied considerably

depending on region, industry, or time frame, and the

mood of uncertainty led many companies to postpone

investments. Moreover, in some markets, intense

competition amid the weak business conditions put heavy

pressure on prices. In this environment, the azbil Group

focused on expanding orders and sales and securing

profits. We also continued to take steps to minimize the

effect on our business activities from the Great East Japan

Earthquake and the accident at the Fukushima Daiichi

nuclear power plant.

　As a result, net sales for fiscal year 2011 increased 2.0%

year on year to ¥223.5 billion. Operating income, however,

decreased 3.7% to ¥14.3 billion due to pricing pressure

and higher expenses such as social insurance premiums.

Net income increased 7.5% to ¥8.5 billion, reflecting an

extraordinary loss in the previous fiscal year on asset

retirement obligations and environmental expenses.

　Looking at results by business segment, deteriorating

market conditions led to weak performance in the Building

Automation business, which delivers products and services

for HVAC and security, mainly to offices and other

commercial buildings, and the Life Automation business,

which sells gas and water meters and provides health and

welfare, nursing care, and other services. On the other

hand, the Advanced Automation business, which provides

products and solutions for production sites such as plants

and factories, achieved growth in sales and profit. This

performance was driven by strong sales of valves, field

instruments such as transmitters, and system products in

the energy and high-performance materials markets, which

more than offset a drop in sales of control products for

equipment manufacturers midway through the fiscal year.

　Fiscal year 2011 ended with a decline in operating

income even though we achieved sales growth, so some

issues remain unresolved. However, we made significant

progress in business structure reform (creating new

businesses) and business operation reform (creating new

work styles). We restructured our production operations to

respond flexibly to changes in the market environment and

reinforced our product development capabilities through

tie-ups and joint development with other companies as well

as in-house development. We developed automated

production lines capable of high-quality production through

replication of human skills and cognition. We acquired

stakes in overseas companies and established subsidiaries

to prepare for full-fledged expansion of our global

operations. With these and other actions, we made

substantial progress in reinforcing our management

foundation. Considering these achievements, even though

we did not reach all of our performance targets, it was a

year that positioned us for the future.

Question 02The Company recently changed its management team. What direction do you plan to take with the new management?

We will offer solutions globally and establish a position as a long-term partner for our customers.

I took over as president on April 1, 2012 from Seiji Onoki,

who is currently our chairman, but the direction of our

thinking is basically the same. I feel that the idea of

“human-centered automation” is better recognized in

society now than it was five years ago when we formulated

this philosophy. Therefore, I see my role as further

advancing and evolving “human-centered automation.” To

do that, it is important to steadily execute the initiatives in

the medium-term plan. We will also speed up the

implementation of measures to respond to the dramatic

changes in our business environment.

I would like to talk about three key initiatives for carrying

out my plan.


We will further enhance the scope and quality of the value we provide in our quest for “human-centered automation” on a global scale.

The Quest for “human-centered automation:”Enhancing Customer Relations and Value (Scope, Quality)

Aiming to become a long-term partner for both the customer and the community through offering solutions based on azbil’s technology and products

Taking global operations to the next level. Global initiative: Expansion into new regions and a qualitative change of focus

Implementing organizational reforms to create a corporate entity that can respond flexibly and continuously to changes in the business environment

Initiative 1

● Future Priorities

The first is establishing a position as a long-term partner

for our customers by offering solutions at customer sites

based on our accumulated technologies and products. In

the Building Automation business, we see growing needs

for high-value-added life cycle solutions, from energy-

saving solutions using building energy management

systems (BEMS) to address electric power shortages and

rising electricity costs to smart cities that link these systems

through networks. In the Advanced Automation business,

we are meeting needs by globally providing solutions for

plants and equipment manufacturers. In the Life

Automation business, we provide products and services for

residences, health and welfare, nursing care, and lifeline

infrastructure. However, I believe we will have to shift to a

multifaceted approach by synthesizing these elements and

drawing on synergy with the Building Automation and

Advanced Automation businesses, in order to raise the

value we provide in the areas of security, safety, and health.

Fulfilling these needs will require that we provide not just

high-quality products but multifaceted solutions that include

consulting, maintenance services, and operational support.

By meeting these needs, we want to be recognized as

indispensable to our customers as well as society.

The second initiative is taking our global operations to

the next level. Up to now we have been building our

foundation for global expansion. Now we will expand our

business to new regions while we enhance and broaden

the solutions we provide to include not just the supply of

products but also consulting and services.

The third initiative is reforming our organization as a

corporate entity. Previously we took various measures to

strengthen our organization in response to changes in the

external environment. For example, we carried out

organizational restructuring to optimize services, product

development, and manufacturing, and reallocated staff

throughout the company to match the new structure. Our

task now is to respond flexibly to global and discontinuous

changes in the environment by continuing to reinforce our

organization and by learning from our daily experiences and

thinking and evolving on our own – in other words, to

transform the azbil Group into a corporate entity that never

stops learning.

Initiative 2

Initiative 3


● Presenting All Stakeholders with the “human-centered” azbil Group

Question 03Shareholders have high expectations for expansion of the azbil Group’s global operations, which are a growth area. Please explain your concrete strategies for this.

We will pursue business expansion along two dimensions – expansion of business regions and domains and a shift in qualitative focus – from a global perspective.

Up to now we have taken various measures to strengthen

our foundation for global expansion. We expanded our valve

maintenance centers in China and Southeast Asia to

improve and enhance our service and maintenance

network, and augmented local product customization and

development functions in Europe, North America, and

China. So we have completed the business infrastructure

improvements necessary for full-fledged expansion. To take

full advantage of this foundation as we expand, I am

positioning the following two points as the pillars of our

strategy.

The first is expansion of our geographic regions and

business domains. We will aggressively expand our business

regions from China and Southeast Asia to India, the Middle

East, and South America (Brazil). As for products, we will

base development on our competitive products with

powerful solutions capabilities, such as control valves for

plants in the Advanced Automation business. We will also

expand business areas such as the Building Automation

business for existing buildings in China and gas meters (Life

Automation business) in Taiwan. To support this expansion,

in the Advanced Automation business, we have signed an

agreement with Tharawat Development Co. in Saudi Arabia

on the establishment of a joint venture to manufacture and

sell control valves in Saudi Arabia, and have also begun talks

with a prospective partner in India to supply products. In the

Building Automation business, we have acquired a stake in

Beijing YTYH Intelli-Technology Co., Ltd., a building

construction and engineering firm, and made it an azbil

Group subsidiary to advance into the local building market in

China. In the Life Automation business, we are quickly

implementing concrete measures, including the

establishment of Azbil Kimmon Technology Corporation, a

joint venture with Yung Loong Engineering Corporation in

Taiwan.

Second, we will make qualitative changes in our

business. Specifically, we will shift from a focus on product

sales to a solution-based business model that

encompasses everything from development and

manufacture of products tailored to local needs to

engineering and service. In China as well as in other

countries in Asia and South America, where we are already

conducting business, economic and social development is

creating growing needs for the consulting services we

provide, including energy management and facility operation

and management in the Building Automation business, and

plant asset management and maintenance and advanced

energy-saving control in the Advanced Automation

business. The business environment that is taking shape

makes it easy to display the azbil Group’s strengths. To give

one example in the Building Automation business, we

established a joint venture with a subsidiary of China Energy

Conservation and Environmental Protection Group (CECEP)

that will leverage the azbil Group’s strengths in BEMS and

energy conservation technology to develop the solutions

business for existing buildings in China.

Question 04What is the azbil Group’s approach to corporate social responsibility (CSR)?

Taking a “human-centered” perspective, we practice “CSR through our core businesses” such as environmental and safety solutions, an approach that is producing results.


Customers, Suppliers

Shareholders

Employees, PartnersSociety

Management and dividend policies that prioritize shareholders

Contributing to employment, etc., as a member of the local community

Contributing globally to the environment and safety through our core businesses

Enhancing the value offered to customersCustomers’ life cycle partner

Providing opportunities for creative activities and growth through putting the Group philosophy into action

Corporate Social Responsibility (CSR)


（Yen）

40

60

80（％）

20

02006

Cash Dividends per Share (left scale)Payout Ratio (right scale)

2007 2008 2009 2010 2011 2012(Forecast)

(FY)

50

60 62 62 63 63

3.2

3.7 3.73.6 3.6 3.5

6334.6 41.2 48.5

73.458.7 54.6 51.7

3.0

3.5

4.0

3.4

20

40

60

80

DOE (right scale)

The azbil Group divides its CSR activities into “basic CSR

and “proactive CSR.”

Basic CSR includes compliance, environmental

preservation, and other activities that are fundamental

obligations for the azbil Group as a corporate citizen.

Among them, concern for the environment is a key theme.

We are aiming for a reduction of 10% or more in the azbil

Group’s total CO2 emissions by fiscal year 2013, ending

March 31, 2014, compared with the level of fiscal year

2006, ended March 31, 2007.

Proactive CSR, on the other hand, involves leveraging

the Group’s strengths to contribute to society via business

operations, as well as voluntary social contribution activities.

The azbil Group’s high-value-added solutions combining

products and services save energy in buildings and

factories, helping customers to reduce their CO2 emissions.

We take particular pride in our substantial contribution to

reducing peak-hour electricity use during the summer 2011

power shortages in Japan. In addition to contributing to

society through our business operations, we encourage

volunteer activities focused on coexistence with society. For

example, in the town of Minamiaizu in Fukushima

Prefecture, where an azbil Group factory is located, we are

working to protect the himesayuri (Lilium rubellum) flower, or

maiden lily, which is a near threatened plant species, as an

initiative to preserve biodiversity.

Our “human-centered” approach enables consistent

CSR for all stakeholders, including customers as well as

communities and society. We will continue to practice

proactive CSR in addition to our basic CSR activities.

Question 05The Company has maintained dividends in an uncertain and challenging business environment. What is your policy on shareholder returns?

Management places priority on returning profits to shareholders, and we maintain a shareholder-oriented management policy.

Returning profits to shareholders is one of the top management

priorities of Azbil Corporation. Our basic policy is to maintain

stable dividends while striving to increase the dividend

payout, taking into account consolidated performance,

return on equity (ROE), and dividends on equity (DOE), as

well as retained earnings for strengthening the business

structure and developing future businesses.

For fiscal year 2011, we paid dividends of ¥63 per share,

as announced at the beginning of the period. In fiscal year

2012, ending March 31, 2013, with the persistently

challenging operating environment and uncertainty about

the economic outlook, we plan to keep the dividend at ¥63

per share to provide stable returns to shareholders. As a

result, we expect DOE of 3.4% and a payout ratio of 51.7%

for fiscal year 2012.

Question 06In closing, what are your aspirations as the new president?

My goal is to achieve further growth through the pursuit of “human-centered automation.”

The azbil Group’s operating environment is changing

dramatically. I believe that becoming an organization that is

capable of an autonomous and organic response to these

changing conditions is essential for further growth. Therefore,

together with Group employees, we will constantly identify

needs at customer sites, interpret them from the

perspective of “human-centered automation,” and discuss

and explore the value that customers really need. In this

way, I want to promote a voluntary shift in our

consciousness and behavior as a corporate entity and

connect that to the creation of a business model that offers

new added value. I believe that will be my biggest role as

the new president.

The azbil Group will work in unison to create new value at

customer sites and ensure that the unified azbil brand

becomes recognized and established globally as a long-term

partner of customers and society. I hope our stakeholders will

look forward to the growth of the new azbil Group.

● Cash Dividends per Share/Payout Ratio/DOE


The azbil Group has been taking various

measures to build a strong foundation for

global growth. With the medium-term plan

that ends in fiscal year 2013 approaching the

midway point, the time has come to move

our global expansion to the next level. In this

feature section, we explain our perception of

the market environment and our measures to

adapt to it, along with examples.

Feature: The azbil Group’s Global Operations

Poised for Global Growth


From building the foundation to a new stage

History of Our Global OperationsAfter forming an equity-based alliance with Honeywell Inc. of the U.S. in 1953, the azbil Group built its business in overseas

markets with the Honeywell brand.

　Our alliance relationship with Honeywell gradually changed over the years, and in the mid-1990s we drew on our experience

to begin global business development under our own brand, partly as a response to requests from Japanese customers who

were expanding their operations overseas. Since then, we have been steadily building our business foundation. Now that its

basic infrastructure has reached a certain level, the azbil Group is ready to advance to the next stage of global growth.

1953Yamatake (now Azbil Corporation) forms an equity-based alliance with Honeywell Inc. (now Honeywell International Inc.) to acquire access to cutting-edge technology and products from the U.S. and achieve further growth during Japan’s high economic growth period. In the 1960s, the Company operates overseas business with the Honeywell brand.

1990Honeywell’s stake in Yamatake-Honeywell Co., Ltd. (now Azbil Corporation) is reduced and the two companies sign a Strategic Alliance Agreement.

1994Overseas subsidiaries are established in China. Other overseas subsidiaries have since been established in various countries, primarily in Asia.

1997The Strategic Alliance Agreement with Honeywell is replaced with business unit agreements. The following year, Yamatake-Honeywell changes its name to Yamatake Corporation and begins accelerating development of the business foundation necessary for global expansion.

2002The equity-based alliance with the Honeywell International Group is dissolved.

2006The Group formulates its philosophy of “human-centered automation” and adopts “azbil” as its group symbol.

2008The Group name is changed to the “azbil Group.” Overseas subsidiaries change the first word in their company names to “Azbil” as the Group seeks to establish recognition of the azbil brand in the global market.

2012With the Japanese market maturing, the Group begins full-fledged expansion of its global operations in pursuit of new sources of growth. Accelerated business promotion initiatives include strategic alliances with local companies in China and Saudi Arabia.

Control valve maintenance center

Overseas branches, branches/sales offices of overseas subsidiaries, distributors

Overseas subsidiaries

Shanghai Hara Seiko Machinery Co., Ltd.Shanghai Yuanli Automatic Exclusive Machine Co., Ltd.

CECEP Building Energy Management Co., Ltd. (Founded in April 2012)

Beijing YTYH Intelli-Technology Co., Ltd. (Capital participation in April 2012)

Azbil Corporation

Azbil Control Instruments Trading (Dalian) Co., Ltd.Azbil Information Technology Center (Dalian) Co., Ltd.Azbil Control Instruments (Dalian) Co., Ltd.

Yamatake Engineering Malaysia Sdn. Bhd.

PT. Azbil Berca Indonesia

Azbil Philippines Corporation

Azbil Hong Kong Limited

Azbil Control Solutions (Shanghai) Co., Ltd.Shanghai Azbil Automation Co., Ltd./Yamatake Automation Products (Shanghai) Co., Ltd.

Azbil Europe NV

Azbil Singapore Pte. Ltd.

Azbil Singapore Pte. Ltd. Technical Service Center

Azbil Malaysia Sdn. Bhd.

Azbil (Thailand) Co., Ltd.

Azbil North America, Inc.

Azbil BioVigilant, Inc.

★

Azbil Taiwan Co., Ltd.Azbil Kimmon Technology Corporation

Azbil Saudi Arabia Limited (To be founded during fiscal year 2012)

Yamatake Environmental Control Technology (Beijing) Co., Ltd.

Azbil Korea Co., Ltd.

Azbil India Pvt. Ltd.

(As of April 1, 2012)

Feature: The azbil Group’s Global Operations

Azbil Vietnam Co., Ltd.


Poised for Global Growth

Azbil Brazil Limited

A Global Growth Strategy That Builds on Our Strengths The azbil Group is expanding its operations in line with the characteristics of customer

businesses and the needs of each region. One example is our solutions for customers who are

pursuing global expansion themselves. Such customers include many companies that are

expanding their businesses using advanced, high-performance products. They require

sophisticated and diverse solutions that range from customization of equipment to service at

their development and production sites.

On the other hand, customer needs are changing in manufacturing industries and building

markets in emerging nations, and we are adapting our business strategies to accommodate

those changes. Rapid economic growth in emerging nations has been accompanied by brisk

capital investment, but an improved standard of living, rising labor costs, and chronic energy

shortages resulting from economic growth are leading to the emergence of advanced needs

such as energy savings.

The knowledge, products, and services the azbil Group has accumulated in Japan will be

advantageous in the operating environment evolving in overseas markets. We have set

“expansion of business regions and domains” and “qualitative change of focus” as the twin

pillars of our strategy to raise our global growth to the next level.

“Expansion of Business Regions and Domains”with Emphasis on SpeedIn emerging nations, where business opportunities are growing day by day, the azbil Group is

expanding its business regions to increase points of contact with customers. Recently the

Group opened operating bases in India, the Middle East, and Brazil.

　Until now, the Advanced Automation business has been ahead of our other businesses in

developing global operations. However, given the changes taking place in the operating

environment, we are expanding our business domains in overseas markets, including

developing the market for the Building Automation business in fast-growing China, and

expanding the Life Automation business in Taiwan, where it is now compulsory for household

gas meters to be equipped with safety functions.

　In carrying out these expansion strategies, we will focus on partnering with local companies to

facilitate quick and effective approaches to local markets, where needs differ by country and region.

Specifically, we are establishing tie-ups and joint ventures and making equity investments in China,

Korea, Australia, Indonesia, India, the Middle East, and other countries and regions.

“Qualitative Change of Focus” to Expand Value at the Point of Customer Contact To meet the growing need for sophisticated, diverse solutions, the azbil Group must go beyond

supplying products by expanding value at the point of customer contact. In our drive to

establish a position as a solution provider, we will focus on leveraging our track record and

expertise in the Japanese market to expand businesses such as energy management and

facility management in the Building Automation business, and plant asset management and

maintenance and advanced energy-saving control in the Advanced Automation business.

　Business operations based on a life cycle solutions concept can broaden and deepen our

contact with customers and contribute to business growth and stability. One of the measures

supporting this qualitative change is our network of valve maintenance centers in each country

and our supply chain for valves that stretches from Asia to India and the Middle East. In

addition, we have been developing a three-pronged network through cooperation between

development bases in Japan and the development sections of Azbil North America, Inc. and

Azbil Europe NV, which handle product development and customization to meet the diverse

needs of equipment manufacturers in North America and Europe.


Poised for Global GrowthFrom building the foundation to a new stage

azbil report 2012 31azbil report 2012 30 azbil report 2012 27

Building Automation

Business

Factory HVAC systems for Japanese manufacturers have accounted for most of the overseas business of the azbil Group’s

Building Automation business up to now. To achieve further growth, expanding in local markets, especially in the large local

markets of China, has become essential.

　In response, the azbil Group is pursuing full-fledged expansion in China to develop the high-potential market for new

buildings and the market for existing buildings, where we can leverage our strengths such as building energy management

systems (BEMS) and energy-saving technologies to meet the pressing need for energy-saving solutions. However,

construction licenses are a prerequisite for conducting full-scale business in the Chinese market, and there are also other

hurdles such as local business customs. We have therefore decided to collaborate with influential local partners to speed

up the process of expansion.

　In the market for new buildings, we made Beijing YTYH Intelli-Technology Co., Ltd. an azbil Group subsidiary to

accelerate expansion into major buildings funded by local capital. By making this company a subsidiary, we are also able to

obtain the construction licenses necessary for doing business in China.

　In the market for existing buildings, we formed a joint venture with a subsidiary of China Energy Conservation and

Environmental Protection Group (CECEP) to sell building automation systems. The new company will focus on promoting

the azbil Group’s BEMS and other energy-saving solutions for government and public buildings.


We will quickly develop potential markets by collaborating with local partners. Full-Fledged Expansion in China

Deng YongChairman and Chief Executive OfficerBeijing YTYH Intelli-Technology Co., Ltd.

Michihiro TomonagaRepresentative and General Manager

Beijing YTYH Intelli-Technology Co., Ltd.

26 azbil report 2012 azbil report 2012 2726 azbil report 2012 azbil report 2012 27

Expansion of Global Operations: Case Studies

Examples of Results of Global Operations (Building Automation Business)

The Energy/PT. Api Metra Graha (Indonesia) Okura Garden Hotel Shanghai (China) Singapore Flyer Pte. Ltd. (Singapore)


In the valve business, our involvement does not end with delivery of the product. We must be able to provide a

comprehensive solution package that covers the full product life cycle from valve selection and installation to operation and

maintenance. After we supply control valve bodies for various fluids and specifications, we provide a control valve

maintenance support system that combines a smart valve positioner, digital technology, and the azbil Group’s long track

record of performance. This system collects data on the operating status of control valves to support the decision-making

necessary for control valve maintenance and ensure efficient maintenance operations. Our ability to offer one-stop service

with a high level of added value is a competitive strength of the azbil Group. We are taking advantage of this strength to

promote a global valve business that provides solutions throughout the life cycle.

　Regionally, this business has focused on East Asia, including China and Korea, and Southeast Asia, but we are planning

to expand it to other regions, starting with the Middle East. To support that effort, we plan to establish Azbil Saudi Arabia

Limited, a joint venture with Tharawat Development Co. of Saudi Arabia, in October 2012 to create a manufacturing and

service base in the Middle East. Shipping all of the valves from Japan, however, would present a cost issue due to their

extremely heavy weight. We are therefore pursuing a product supply alliance with a prospective partner company in India to

procure valves closer to the region, which will lead toward the establishment of a supply chain that will stretch across Asia

from Japan to the Middle East. These initiatives will increase our presence as a valve manufacturer in Asia.

Subhi Al-HashemRepresentative Director (to be appointed)Azbil Saudi Arabia Limited

Tetsuya KurasawaRepresentative and Managing Director

(to be appointed)Azbil Saudi Arabia Limited

The strongly competitive valve business will support the azbil Group’s expansion of business regions and qualitative change of focus.

Promoting the Global Valve Business


Advanced Automation

Business


Examples of Results of Global Operations (Advanced Automation Business)

PT. Pertamina (Indonesia) SK energy Co., Ltd. (South Korea)Mitsui Elastomers Singapore Pte. Ltd. (Singapore)


Building a Corporate Group That Never Stops Learning on a Global ScaleThe azbil Group does not divide its business between domestic and overseas operations. We take a global view of

our business operations and place importance not just on sharing information within Japan, but sharing and

utilizing various types of information from different parts of the world. In this way, we are aiming to become a

corporate group that never stops learning on a global scale.

　In addition to using e-mail and other information technology, we also place importance on face-to-face

communication. The presidents of subsidiaries from different regions regularly gather at meetings to share issues

that arise at customer work sites, the point of contact with customers. By bringing their expertise together, they

are able to quickly come up with solutions for these issues. They then take the knowledge and know-how gained

from these meetings and apply it in their respective regions. With this effective mechanism for organizing diverse

experiences from around the world into collective knowledge and recycling it back into local regions, we are

putting into practice our concept of a corporate group that never stops learning on a global scale.

　We have also introduced a system for sharing job information in and outside Japan. This system serves as a

platform that allows users to accumulate and utilize technologies, skills, and experience globally. Information on

progress and job processing at the job level is shared in real time with those involved in the project from terminals

in each region, contributing significantly to the spread of knowledge and expertise.

Developing Human Resources to Accelerate Global Growth Tactics geared to local market conditions and

customer needs are vital for expansion of our global

operations. An essential component of that

approach is strengthening local human resources.

The azbil Group conducts various training and other

human resource development programs for local

management and staff to instill the azbil Group

philosophy of “human-centered automation,”

sharpen business skills, and raise the level of

governance and internal controls. Partly because of

the effectiveness of this approach, an increasing

number of overseas subsidiaries are headed by

presidents who are from the region and to whom

we can confidently entrust business.


● Globalization of the customers’ business foundations

● Various issues coming up from each area

Working on site to condense the issues and evolve new solutions (value offered to the customer)

● Making use of the azbil product/service network to offer optimum solutions on site (Japan and overseas)



The azbil Group develops solutions globally with the aim of establishing a position

as a long-term partner to its customers. This section introduces the market

environment, performance, outlook, and global operations of our Building

Automation, Advanced Automation, and Life Automation businesses.

Business Overview

Our Operations


30 Building Automation Business

32　Advanced Automation Business

34 Life Automation Business

36　Global Operations

38　Business Foundation

Operating EnvironmentAmid expectations of a steady recovery

from the global economic recession, the

impact of the Great East Japan

Earthquake and the accident at the

Fukushima Daiichi nuclear power plant in

March 2011 was substantial. With

uncertainty about Japan’s economic

outlook, real estate-related markets were

weak, and severe competition led to

strong pressure to lower prices,

particularly in the market for new

buildings, which affected profitability.

Even the market for existing buildings,

where growth was expected due to

stricter CO2 emission regulations, was

sluggish as investments in fiscal year

2011, ended March 31, 2012, focused on

short-term electricity conservation

measures. However, changes in the

operating environment are also

generating new demand, from energy

conservation measures to deal with

electricity cutbacks and rate hikes, to

smart city initiatives. In overseas markets,

demand is growing for energy

conservation solutions, an area of

strength for the azbil Group.

Fiscal Year 2011 PerformanceIn Japan, orders rose substantially

compared with the previous fiscal year,

principally due to orders won through

market testing,* which extends to the

operation and management of buildings

and facilities. There was a drop in sales

related to new buildings as well as for the

business targeting existing buildings, in

which there had been several large-scale

projects in the previous fiscal year.

However, we generated add-on contract

work through our energy conservation

proposals, and successfully expanded

into the new domain of market testing,

leading to steady growth in the service

business. As a result, overall sales for the

domestic market increased year on year.

　In the business related to existing

buildings, owing to concerns about

possible power supply shortages and

increases in the cost of electricity,

demand for energy-saving measures

remained strong, with a high number of

customer inquiries. However, as stated

above, there was a tendency among

many customers to postpone investment

in energy-saving improvements.

　In overseas markets, the azbil Group

has added to its traditional advantage

While implementing thoroughgoing measures to deal with the urgent issue of improving profitability, we will transform the Building Automation business into a provider of high-value-added life cycle solutions for future business growth.



Keiichi FuwaExecutive DirectorManaging Executive OfficerBuilding Systems Company President Azbil Corporation

* Market testing is a government-and-private sector competitive bidding system in Japan. As required by the Act on Reform

of Public Services by Introduction of Competitive Bidding, this system ensures that contacts for public services hitherto

provided by the government are to be decided by competitive bidding in which public and private operators participate on

an equal footing. The contract is awarded to the operator offering the best quality for the best price. As a result of this

bidding process, orders are placed for large-scale service projects that stretch over several years, and Azbil Corporation

records the total value of a contract for that multi-year period as a lump sum for accounting purposes. The periods covered

by contracts won through such market testing range from 3 to 5 years, and thus the sums involved are quite considerable.

Consequently, they account for the bulk of the growth in orders for the Building Automation business in fiscal year 2011,

ended March 31, 2012. Note, however, that the revenue from service rendered in any year is recorded in the sales figures

for that fiscal year.


Business Overview

Bu

siness O

verview

Hiroshi NoguchiSales 2nd Department

Business Headquarters Building Systems Company

Azbil Corporation

among factories operated by Japanese

companies by developing the non-

Japanese market through tie-ups with

local enterprises, making use of its

unrivalled experience and energy-saving

expertise in Japan. As a result, overseas

sales increased.

Fiscal Year 2012 OutlookFirst, to deal with the pressure on profits,

in addition to reducing costs, we will be

thorough in implementing selective order-

taking and other measures to strengthen

our business structure. In this way we will

regain profitability in existing business

domains while shifting toward a high-

value-added life cycle solutions model

that captures new demand generated

from structural changes in the market.

For example, in order to develop our

energy conservation business to help

customers deal with electricity cutbacks

and rate hikes, we will serve as an

aggregator to propose solutions that

capitalize on the proprietary expertise,

accumulated data, and on-site workforce

and equipment of the azbil Group,

making use of government subsidies for

installing building energy management

systems. This will enable us to expand

our business domain from large-scale

buildings to small- and medium-sized

In fiscal year 2011, ended March 31, 2012, although sales of the business for new and existing buildings decreased, the service business and overseas sales grew steadily. As a result, sales were ¥103.9 billion, an increase of 1.7% from the previous fiscal year. On the other hand, segment profit (operating income) decreased 12.1% to ¥10.3 billion, despite efforts to reduce expenditures, as falling prices reduced profitability and social insurance premiums increased.

Sales Operating Income


A Solution for Reducing Power Usage in Existing Large-scale Server Rooms with a High Return on Investment


TOPICS

buildings. In addition, we will proactively

develop markets with growth potential

and demand for high-value-added

services, such as cooling solutions for

data centers and performance

qualification for pharmaceutical

production lines, by capitalizing on the

differentiated combinations of products

and services offered by the Group. In

overseas markets, we will develop business

based on high-value-added solutions such

as energy conservation proposals. To

secure the products and implementation

structure required to develop this business,

we prepared to invest in an overseas

company during fiscal year 2011.

BroadBand Tower, Inc.

BroadBand Tower operates a total of four data centers, three

in Tokyo and one in the Kansai region, and provides a wide

range of sophisticated value-added services to its client

companies using IT solutions.

　BroadBand Tower had already achieved substantial results

from its proactive measures to reduce power consumption. To

meet its power reduction needs for its large-scale, 1,200m2

server room, the company selected AdaptivCOOLTM,* an

environmental solution for data centers. This solution enabled

the company to shut down 8 of its 33 air-conditioning units,

resulting in a further 8.8% reduction in power usage from its

air-conditioners after the company had already achieved a

20% reduction from its own in-house initiatives.

* AdaptivCOOL is a registered trademark of Degree Controls, Inc.

　　From the Account Representative

Our requirement when proposing this project was to ensure that there would be no impact on the

customer’s systems in operation during installation. As a result, we carefully reviewed the installation

location of the floor cooling fan and temperature sensors and performed the installation work in three

steps. We conducted detailed simulations in advance of temperature conditions of the entire floor after the

completion of each step, which helped ensure we were thoroughly prepared for the actual installation.

Going forward, I hope to propose solutions for the automated control of air-conditioner operations and

for visualizing power consumption to help achieve even greater energy conservation.

0

20

40

60

80

100

120

2007 2008 2009 2010 2011

100.5 100.4 102.1 103.9

(FY)

(Billions of yen)

96.7

0

5

10

15

2007 2008 2009 2010 2011

11.8

13.1

11.5 11.7

10.3

(FY)

(Billions of yen)

{

Operating EnvironmentIn Japan during fiscal year 2011, ended

March 31, 2012, growth was firm in

markets related to highly functional

materials such as lithium ion batteries, an

area of strength for Japanese companies.

In addition, our customers worked

diligently to quickly recover and rebuild

following the Great East Japan

Earthquake. As a result, demand grew in

markets such as oil refining and paper

and pulp, and energy-related markets

overall were stimulated by moves to

switch energy sources and restart

thermal power plants to deal with a

power supply shortage caused by the

shutdown of the Fukushima Daiichi

nuclear power plant, which was damaged

by the tsunami. With this shortage, an

unprecedented request for electricity

conservation from the Japanese

government and the soaring price of

crude oil led to an increase in demand for

energy conservation and environmental

solutions.

　In markets related to equipment

manufacturers, including semiconductor

manufacturing equipment and industrial

furnaces, demand surged at the start of

the fiscal year as companies rushed to

secure parts and materials due to

concerns about supply shortages caused

by the Great East Japan Earthquake and

accident at the Fukushima Daiichi nuclear

power plant. However, this demand

declined in the middle of the fiscal year

due to the weakening economy and

inventory adjustments.

　Overseas, the Chinese market was

affected by Europe’s economic

uncertainty and monetary tightening

measures, but growth was steady in

the Asian market as a whole.

Fiscal Year 2011 PerformanceIn Japan, in the field of process

automation, demand grew in markets

such as highly functional materials, as

described previously. In addition, in

meeting increased demand for

earthquake recovery and reconstruction

and from energy and energy

conservation-related markets, we made

continuing, all-out efforts in a spirit of

helping our customers with

reconstruction support, resulting in

increased sales of field instruments such

as transmitters and system products.

Consequently, despite a year-on-year

decrease in sales of control products

used by equipment manufacturers for

factory automation, overall sales in Japan

increased.

　In overseas markets, sales of control

products for equipment manufacturers

decreased, but sales of valves and field

instruments for plants increased. As a

result, overall sales increased despite the

impact of currency translation.

We will work to expand and strengthen the functions of our bases to globally provide plant owners and equipment manufacturers with solutions unique to the azbil Group.



Masato IwasakiExecutive DirectorManaging Executive OfficerAdvanced Automation Company PresidentAzbil Corporation

Business Overview

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Fiscal Year 2012 OutlookDomestic and overseas customers in the

manufacturing industry require vendors

with networks that can provide value

globally in line with their business

development. The azbil Group has

developed its global network with a focus

on Asia and will promote expansion there;

it will also expand in the Middle East and

South America by establishing local

subsidiaries and other methods. In

addition to expanding in these regions, we

will promote a qualitative shift by

enhancing our platform for developing

businesses that match the needs and

characteristics of each region.　

　In Asia, we have strengthened our

business structure from manufacturing

and engineering to maintenance with the

aim of establishing our position as a

unique instrumentation solutions vendor,

and we plan to strengthen and expand

our business with a focus on control

valves, a field in which we excel. So far,

we have moved to set up and enhance

valve maintenance centers at our main

operating sites in Asia, and we will

strengthen our valve business, including

a supply chain stretching from Asia to the

Middle East, through tie-ups with local

companies in Saudi Arabia and India (see

page 27 for details). In Europe and North


In fiscal year 2011, ended March 31, 2012, although sales of control products for equipment manufacturers decreased, sales of valves, field instruments, and system products grew in the energy and highly functional materials markets. As a result, sales increased 3.9% year on year to ¥84.1 billion. Segment profit (operating income) also increased 23.9% year on year to ¥4.0 billion, due primarily to the increase in sales.


Tsutomu Ozono 1st Sales Department

Kansai Regional Division Advanced Automation Company

Azbil Corporation

America, where major equipment

manufacturers are located, we will

strengthen the ability of our local

subsidiaries to offer customized design

and development solutions, and establish

a three-pronged network including Japan

to capture a greater market share. In

Japan, we will continue to focus on

providing solutions for highly innovative

new development processes in markets

including lithium ion batteries and highly

functional film, and endeavor to capture

business opportunities from markets

related to the shift to liquefied natural gas,

new energy sources, and alternative

energies, where growth is expected.

Contributing to Energy Conservation at the Suntory Group by Achieving “Visualization” of Power Consumption at Each Workplace

Suntory Group

Under its corporate philosophy “In Harmony with People and

Nature,” the Suntory Group has long been involved in

environmental preservation activities aimed at achieving

co-existence with the natural environment. When power usage

restrictions were instituted under Article 27 of the Electricity

Business Law to deal with electrical supply problems in the

summer following the Great East Japan Earthquake, the Suntory

Group committed to implementing a visualization solution for

monitoring power consumption at its production sites and main

office buildings. The Suntory Group adopted ENEOPTTMpers, our

solution package for an optimized balance of power supply and

demand. By implementing energy conservation measures based

on visualization using ENEOPTpers, the Suntory Group achieved its

target of reducing electricity consumption by 15% year on year

without affecting its production activities. 　　

From the Account Representative

The customer’s strong desire to visualize energy consumption, even before the power usage

restrictions that followed the Great East Japan Earthquake, was apparent from its innovative

approach of effectively using existing hardware and software licenses as well as utilizing a virtual

environment to avoid operational load increases from adding a server machine. We met these

requirements through internal teamwork. Going forward, I would like to help the Suntory Group

achieve its goal of becoming a low-carbon company.

Sales Operating Income

0

20

40

60

80

100

120

2007 2008 2009 2010 2011

105.4

93.6

81.0 84.1

(FY)

(Billions of yen)

76.9

0

2

4

6

8

10

2007 2008 2009 2010 2011

8.9

5.0

0.6

3.2

4.0

(FY)

(Billions of yen)

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TOPICS

Operating EnvironmentCovering the fields of lifeline and lifestyle

facilities, health and welfare, and nursing

care, the Life Automation business

comprises several companies in different

business environments. Azbil Kimmon

Co., Ltd., which accounts for the bulk of

Life Automation business sales, operates

under a cycle of demand for the periodic

replacement of gas and water meters

that is based on regulations. In fiscal year

2011, ended March 31, 2012, in addition

to market factors including being in an

off-demand season for LP gas meters,

the Fukushima Daiichi nuclear power

plant accident forced the temporary

suspension of some of the company’s

production facilities.

　The health and welfare and nursing

care fields, where Azbil Care & Support

Co., Ltd.1 operates, are affected by

cutbacks in local governments’ welfare

budgets. However, there is high potential

demand in these fields due to changes in

social structure such as the aging of

society. Demand for the residential central

air-conditioning system business Azbil

Corporation operates is expected to grow

in the future due to increasing needs for

health and comfort in living spaces. 1. On April 1, 2012, Safety Service Center Co., Ltd., which operates emergency alert response services, and Yamatake Care-Net Co., Ltd., which operates the nursing care support businesses, merged to enhance their customer services.

Fiscal Year 2011 PerformanceAt Azbil Kimmon, which accounts for the

bulk of sales in the Life Automation

business, the Fukushima Daiichi nuclear

power plant accident forced the

temporary suspension of some of the

company’s production facilities, and LP

gas meter sales are lower in the off-

demand season. As a result, sales

decreased.

　In health and welfare and nursing

care, our emergency alert response

service for the elderly has approximately

62,000 customers (as of March 31,

2012), making us one of Japan’s largest

private-sector service providers in the

field. Nevertheless, the operating

environment was challenging, with factors

such as cutbacks in welfare budgets by

local governments. To address this

situation, we launched a new product,2

expanded our service sites, and

enhanced our service offerings, which

helped increase sales.

　In the field of residential central air-

conditioning systems, we strengthened

our sales force and opened Platz

Kikubari, a showroom at one of Japan’s

largest permanent housing exhibitions, as

part of our implementation of aggressive

sales measures targeting both home

builders and individual clients. These

efforts also helped to increase sales.

　Overall, Life Automation business sales

were roughly on par with the previous

fiscal year because vigorous efforts for a

quick operational recovery minimized the

impact of the Great East Japan

Earthquake and nuclear power plant

To transform the Life Automation business into one that contributes to living with peace of mind, we are proactively promoting the expansion of our business domains, such as expanding regionally, including overseas, and enhancing our lineup of products for individual consumers.



Ichio KuniiManaging Executive Officer

Home Comfort BusinessAzbil Corporation

Kanichiro ShimodaPresidentAzbil Kimmon Co., Ltd.

Hidetoshi MiwaPresident


Business Overview

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Yasuyo Komiyaji Nutritionist

Preventative Services GroupHealth Support Center

Care Center HeadquartersAzbil Care & Support Co., Ltd.

accident, and also because of growth in

sales of nursing care support services

and residential central air-conditioning

systems. Profits were affected by the

impact on production of the nuclear

power plant accident and by the

increased costs associated with

marketing residential central air-

conditioning systems. However, due to

such factors as increased prices for

water meters, there was an improvement

in segment loss (operating loss)

compared with the previous fiscal year.2. We developed and launched a mobile version of our emergency alert response service for the elderly called the Nurse Phone-Anshin Pendant, which uses the Mimamori Phone device of SOFTBANK MOBILE Corp.

Fiscal Year 2012 OutlookThe Life Automation business aims to

grow by expanding into new regions and

new business domains, including in the

private sector, while generating stable

profits in existing business domains by

strengthening its business structure. In

Taiwan, where demand is expected to

grow for intelligent gas meters with safety

functions due to a revision of the law, we

established a joint venture gas meter

company and started production as part

of our efforts to expand our global

operations. Azbil Care & Support will

expand its business domains to include

In fiscal year 2011, ended March 31, 2012, we worked to minimize the impact of the Great East Japan Earthquake and Fukushima Daiichi nuclear power plant accident, and consequently, sales were ¥32.5 billion, a slight decrease of 0.2% year on year. Despite the effects of the nuclear power plant accident and an increase in expenses aimed at expanding sales of residential central air-conditioning systems, segment loss (operating loss) improved to ¥0.1 billion from ¥0.2 billion in the previous fiscal year, due mainly to a recovery in sales prices of water meters.


Helping to Improve Lifestyles through a Program Focused on Voluntary Action

Keisei Electric Railway Health Insurance Society

Because more than half of the Keisei Group’s employees are

involved in railway or bus operations, work schedules are apt to

interrupt their lifestyle routines. Azbil Care & Support has the

experience of providing a specific health guidance program to

the azbil Group’s Health Insurance Society, which enabled the

company to anticipate the entire process required by the Keisei

Group and ensure a seamless transition after implementation.

Participants in the program strive to make lifestyle

improvements by setting and achieving their own health goals,

like walking 10,000 steps each day, under the guidance of Azbil

Care & Support staff.


The key feature of Azbil Care & Support’s specific health guidance is “empowerment,” with participants

receiving support to recognize their own ability to make lifestyle improvements and achieve their health

goals. We also utilize the telephone communication skills we have developed through our emergency alert

response service over its history of more than 25 years to have nutritionists and other specialist staff

respond to inquiries on meals or exercise. This has helped us achieve an extremely high program

completion rate of 96%.


Note: The purchase of Azbil Kimmon has generated expenses for amortization of goodwill since fiscal year 2006. Making the company a wholly owned subsidiary has doubled such expenses since fiscal year 2008.

assisted living facilities for the elderly and

24-hour regional comprehensive care

services by capitalizing on the

enhancement of its management

foundation from the merger. In the field of

residential central air-conditioning

systems, we will work to increase our

market share by enhancing our sales and

development force, although this will incur

upfront costs. By doing so, we will

promote the transformation of the Life

Automation business into one that

contributes to living with peace of mind.

⇨ We provided the Nurse Phone-Anshin Pendant to elderly residents of temporary housing in areas affected by the Great East Japan Earthquake. See page 49 for details.

Mr. Hiroyuki Okuhara, Manager

Sales Operating Income (Loss)

0

10

20

30

40

2007 2008 2009 2010 2011

36.5 35.9 34.732.6 32.5

(FY)

(Billions of yen)

2007 2008 2009 2010 2011

(0.3)

(0.2)

0.4

(0.2)

(0.1)

(FY)

(Billions of yen)

(0.4)

(0.2)

0

0.2

0.4

0.6

{

TOPICS

Operating EnvironmentDespite persistent destabilizing factors in

the operating environment, with financial

instability in Europe, a slowdown in the

United States economy, decelerating

economic growth in emerging nations,

and the sharp appreciation of the yen, the

overall Asian economy including China

was on a recovery track. It is thought that

emerging nations led by China will

continue to drive global economic

growth, and demand is expected to

increase as capital investment rises in

these regions. In addition, demand is also

expected to rise for upgrades of existing

systems with higher added value, asset

management services including

maintenance, and sophisticated energy-

saving control solutions.

Fiscal Year 2011 PerformanceIn order to expand our global operations,

we have continued to strengthen our

business foundation, such as by

enhancing the production, development,

and maintenance functions at our

overseas sites to meet individual local

needs and characteristics. In fiscal year

2011, we also carried out proactive

measures including alliances with local

companies. In the Building Automation

business, in order to capture growing

demand for environmental and energy

conservation solutions in China, we

conducted discussions on establishing a

joint venture and prepared to invest in a

local company, which has become a

subsidiary and a member of the azbil

Group. In Asia, we organized an energy

conservation seminar and carried out

enlightenment activities to spur demand.

In the Advanced Automation business,

we strengthened our valve maintenance

facilities and staff at our main operating

sites, such as in China, Thailand, and

Taiwan. In October 2011, we also

relocated and expanded our valve

maintenance center in Singapore. In

addition, we signed a joint venture

agreement with a company in Saudi

Arabia to build a supply chain that

stretches from Asia to the Middle East for

the expansion of our control valve

business. To expand our flowmeter

business in China, we installed a

flowmeter calibration facility at the

production site of a Group company. To

enhance our ability to provide solutions to

equipment manufacturers in Europe and

North America, we strengthened the

We plan a qualitative change of focus to meet the increasingly sophisticated needs of our customers and to expand our business regions and domains, in order to capture business opportunities in rapidly growing emerging nations and from our customers’ global expansion.

Global Operations

Overseas Sales* by Region(Fiscal year 2011)

Toshitsune OkuboManaging Executive OfficerInternational BusinessAzbil Corporation

* Overseas sales figures are included within the sales of the Building Automation, Advanced Automation, and Life Automation businesses. Sales statistics denote figures from overseas subsidiaries and affiliates and direct exports. Indirect exports are not included.

⇨ See the Feature, “The azbil Group’s Global Operations,” on pages 23-28 for details.

Business Overview

84.0%Asia

8.7%

North America

4.1%Europe 3.2%

Other

33.7%

China(included in Asia)


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Support for the Building Air-Conditioning System at a Singapore Business Park Housing High-Tech Businesses

customized design and development

capabilities of local Group companies. In

the Life Automation business, Azbil

Kimmon Co., Ltd. established a joint

venture company with a Taiwanese

company and began production and

sales of gas meters.

　In addition to these measures to

strengthen our business foundation, we

focused on securing, cultivating, and

enhancing superior human resources

locally to simultaneously establish a

business structure for globalization on the

employee level.

Fiscal Year 2012 OutlookA sense of uncertainty still persists, with

financial instability in Europe and a high

unemployment rate in the United States,

although monetary loosening measures in

China are expected to have an effect.

This indicates that the operating

environment in emerging nations, mainly

in China and other Asian countries, will

remain on a recovery track in fiscal year

2012, ending March 31, 2013, and

beyond. Overseas markets represent key

domains critical to the growth of the azbil

Group, and we will develop a network

and business structure ranging from

Despite a sense of stagnation in Europe and North America, sales increased during fiscal year 2011, ended March 31, 2012, primarily for the Building Automation business in China and other Asian regions, while sales of field instruments and valves in the Advanced Automation business also rose. As a result, even with the impact of currency translation, overseas sales increased 9.7% year on year to ¥19.8 billion.

Overseas Sales/Ratio to Net Sales

Fiscal Year-End Exchange Rate(vs. U.S. dollar)

development and production to sales,

engineering, and maintenance, through

close collaboration with our overseas

subsidiaries and alliances with local

companies. To meet the needs of our

multinational customers and local

companies that require more advanced

life cycle solutions ranging from product

supply to sophisticated energy-saving

control solutions and operational

management, we will use our expertise

and proven track record in Japan to

develop a business model unique to the

azbil Group.

Changi DCS Plant

Changi DCS* Plant is a facility with a capacity of 30,000

refrigeration tons that serves each building in the Changi

Business Park, home to the high-tech divisions and research

divisions of many multinational corporations. The plant must

guarantee a stable supply of chilled water to customers in

each building of the business park 24 hours a day, 365 days a

year. Changi DCS Plant is monitored and controlled by the

azbil Group’s Harmonas-DEOTM system. Installed in 2010, the

new system improves usability by transmitting information

from the existing system into Harmonas-DEO and adopts

redundant design to further improve operational reliability. The

system’s superior operability and visibility also enhanced the

work flow efficiency of the plant’s on-site operators.

* DCS: District Cooling System


I was contacted by the customer because they needed to strengthen their monitoring and control due to

expansion taking place at the business park. The fact that we have been working as a reliable partner to

two other DCSs in Singapore provided the impetus for the customer to implement our solution. I look

forward to supporting the stable operations of this ever-growing business park as well as provide energy

saving technologies unique to the azbil Group to help Singapore achieve its CO2 reduction targets. Nai Choon Siang

System Engineering ManagerAzbil Singapore Pte. Ltd.

0

5

10

15

20

2007 2008 2009 2010 2011

7.8 7.6

6.9

8.2

8.9

18.0 18.1

19.8

(FY)

(%)(Billions of yen)

0

2.5

5.0

7.5

10.0

Overseas Sales (left scale)Ratio to Net Sales (right scale)

19.4

14.5

2007 2008 2009 2010 2011

100 98

(FY)

(Yen)

0

50

100

150

83 8293

TOPICS


{

Research and DevelopmentGuided by the Group philosophy of “human-centered automation,”

the azbil Group has consolidated its Group-wide R&D with the

product development sections of each business department to

achieve uniformity from technology development to trial manufacture,

in order to rapidly develop next-generation products that meet

prospective needs. We create new value for customers quickly

and globally by capitalizing on the expertise we have accumulated

at customers’ work sites as well as the advanced technological

capabilities and skills within the azbil Group.

R&D InvestmentIn fiscal year 2011, ended March 31, 2012, the azbil Group’s

total expenditures on R&D amounted to ¥8.8 billion, equivalent

to 3.9% of net sales. Compared with the previous fiscal year,

there was no major fluctuation in the total costs, and investment

in R&D continued at a steady pace.

In fiscal year 2012, ending March 31, 2013, in light of

medium-to-long-term trends in society, customer issues, and

technology, and in order to respond to various changes

occurring in the buildings market, in industry, and in lifestyles,

we have set forth five new strategic technology areas that

appear to have far-reaching value. We will continue proactive

investment in these areas for efficient and timely product

launches. Furthermore, to promptly meet the requirements of

customers who are diversifying overseas, we will strengthen our

development capabilities in North America, Europe, and other

locations outside Japan, and promote greater collaboration

between those locations and our development functions in Japan.

Business Foundation

Yoshihide SuginoManaging Executive Officerazbil Group Technology Development,azbil Group Environmental Load Innovation, Corporate Quality Assurance Promotion, Department of Safety AssessmentAzbil Corporation

Makoto KawaiExecutive Director Managing Executive Officerazbil Group Production azbil Group Purchasing Azbil Corporation

Mitsuharu Miyazawa Managing Executive OfficerService BusinessAzbil Corporation

By strengthening a uniform, Group-wide foundation for growth that encompasses research and development, production, and services, the azbil Group strives to be a corporate entity that responds flexibly and continuously to changes in the business climate.

1. Machine Systems with Humanlike Abilities Technology incorporating humanlike abilities into machine systems Example focus: An advanced intelligent production system that incorporates humanlike skills 2. Flexible Measurement and Control For a wide variety of manufacturing and living environments, measurement and control technology with greater freedom of time and place Example focus: Steam energy measurement that enables a new method of energy management

3. Advanced Technology That Clarifies Complex Systems Technology that clarifies the status and problems of complex processes, allowing the development of highly evolved systems with advanced controllability Example focus: Large-scale process optimization

4. Systems Enabling Us to Live in Harmony with Nature Harmonizing human activity (production and living) with nature by reducing impact on the environment by means of control technology Example focus: Smart grid-ready BEMS (Building Energy Management System)

5. Individualized Environmental Comfort Systems Technologies offering comfortable and high-quality living space Example focus: Air flow control for temperature distribution

Strategic Technology Areas

Business Overview


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Business FoundationExamples of Research and Development Technologies1. Establishment of Integrated System from Product Development to Production ProcessWe developed the HP7 series, a general-purpose photoelectric

sensor with a built-in amplifier, which

offers detection of extremely small

objects and highly precise positioning.

Coordination with the product

development department from the

start of development established a

production process that utilizes

humanlike automation technology*

starting from the product design

stage, enabling high-quality product

manufacturing at a low cost. * Intelligent machinery with the same dexterity and sight as a human

2. Joint Development with a Group Company in Japan

In cooperation with Azbil Care & Support Co., Ltd. (formerly

Safety Service Center Co., Ltd.), we developed the Nurse

Phone-Anshin PendantTM, a mobile version of our emergency

alert response service, as well as the related systems for the call

center that receives alerts.

3. Joint Development with a Group Company in North America

We built the g-lab, a world-class sterile environment testing

facility. In a collaborative project involving Azbil BioVigilant, Inc.

in North America and the development department in Japan,

we developed an improved compact high-performance model

of our IMDTM Instantaneous Microbial Detection, which

continuously detects microbes in real time.

Intellectual PropertyThe azbil Group regards intellectual property as a vital

business resource, and as such it ranks its intellectual

property strategy as a key business strategy for its global

development. The Group is carrying out its business, R&D,

and intellectual property strategies in concert, with emphasis

on establishing an intellectual property portfolio in major

product lines and technological fields, and on conducting risk

management of its intellectual property rights.

Establishing an Intellectual Property Portfolio in

Major Product Lines and Technological Fields

The Technology Committee establishes quantitative targets for

inventions. Personnel in charge of development are given these

targets and report inventions as part of their organization’s R&D

achievements. Marketing and development departments work

closely to monitor inventions that belong to major product lines

and technological fields. This intensive attention ensures the

speedy acquisition of valuable patents.

　As a result of these activities, the number of patent

applications we filed in Japan during fiscal year 2011 reached

approximately 300.

　As we expand globally, we will also promote and enhance

overseas patent applications as a key policy from the

standpoints of our business strategy, R&D strategy, and

intellectual property strategy.

Risk Management

As our business becomes increasingly global, each month we

check more than 1,000 official open patent applications from

other companies in the United States and China as well as

Japan to avoid disputes related to other companies’ patents

involving our products. This reduces business risk and greatly

increases our freedom to conduct research and development.

Brand Management

We are actively applying to register “azbil” as a trademark in

more than 100 countries around the world in order to

strengthen our brand globally.

IMD Instantaneous Microbial Detection

Receiving an alert from a Nurse Phone-Anshin Pendant (user terminal)

The new HP7 general-purpose photoelectric sensor with built-in amplifier

Number of Domestic Patent Applications

Scope of calculations: Azbil

(Number of applications)

100

0

200

300

400

2006 2007 2008 2009 2010 2011 (FY)

330351

261296

280

173



Production and ProcurementThe pace of change in our business structure is accelerating as

a result of frequent overseas relocation by our Japanese

customers and intensifying global competition. For a flexible and

continuous response to these changes, we are working to

optimize and strengthen the entire azbil Group through business

restructuring and establishment of production and procurement

systems that are cost-competitive on a global level.

Restructuring of Production in Japan

In Japan, Yamatake Corporation merged with Yamatake

Control Products Co., Ltd. to create Azbil Corporation on

April 1, 2012. We established the Production Management

Headquarters to accelerate the optimization of our production

functions globally. Our aim is to build a competitive business

structure that is capable of agile response to change. This

structure will eliminate redundancies, improve productivity by

flexibly deploying necessary resources, and further strengthen

collaboration between our development departments and

purchasing departments. In addition, it will bolster

manufacturing technologies and reduce the time from

development to production.

Expanding Overseas Production Sites

Outside Japan, we are developing and strengthening our

production and procurement capabilities globally in order to

accelerate expansion of our global operations. As part of this

effort, we built a flow calibration facility at Azbil Control

Instruments (Dalian) Co., Ltd. to meet Chinese standards and

expand our flowmeter business. Also, we established Azbil

Kimmon Technology Corporation, a joint venture with Yung

Loong Engineering Corporation, to manufacture gas meters in

Taiwan. We have also established Azbil Saudi Arabia Limited,

a joint venture with Tharawat Development Co. of Saudi

Arabia. This new company will manufacture and sell control

valves, with marketing scheduled to begin in October 2012

and production activities in autumn 2013.

Engineering ServicesCapitalizing on the wealth of knowledge and expertise we

have gained from working on customer sites in Japan and

overseas, we will strengthen our engineering services by

building an operating structure and developing human

resources that can provide high-value-added services unique

to the azbil Group on a global scale.

Restructuring of Service in Japan

We established our Service Headquarters in January 2012 to

optimize and strengthen our service capabilities. The

headquarters will strengthen existing and new services in

Japan by capitalizing on our ample service network in

approximately 200 locations nationwide. At the headquarters,

human resources will be developed and optimally deployed,

accelerating synergies within the azbil Group and enabling us

to be long-term partners to our customers and to society.

　In fiscal year 2011, we bolstered our service structure and

rolled out new services, including high-value-added services

for the pharmaceutical industry, market testing, and

operational management for social infrastructure.

　In addition, our Measurement Standards Center, as a

calibration provider accredited by JCSS (Japan Calibration

Service System), will help strengthen our life cycle solutions

foundation by providing the highest quality calibration services

in Japan.

　Also, to strengthen services for regions and individuals,

Safety Service Center Co., Ltd. and Yamatake Care-Net Co.,

Ltd. merged to form Azbil Care & Support Co., Ltd. To

strengthen our engineering capabilities, three construction-

related subsidiaries of Azbil Kimmon Co., Ltd. merged to form

Azbil Kimmon Engineering Co., Ltd.

Expanding Our Domestic Service Network Overseas

In order to provide the same level of service overseas as we

do in Japan, we have built or strengthened necessary

operating structures and developed key human resources. To

expand our life cycle solutions business in China and

elsewhere in Asia, we have strengthened our valve

maintenance capabilities at our core sites in China, Taiwan,

Thailand, and Singapore. Moreover, we are making efforts to

develop human resources locally in order to construct a

framework for collaboration between Japan and our sites in

China and the rest of Asia.

Calibration facility at Azbil Control Instruments (Dalian)

Valve maintenance center (Taiwan)


For general information on our initiatives for

strengthening our management framework,

please refer to

http://www.azbil.com/csr/soc/index.html

Our Management

The azbil Group, a world-class enterprise specializing in automation, engages in a

variety of Group-wide activities in support of its goal of “CSR Management That

Values People.” This section introduces the azbil Group’s management framework,

which forms the core of its CSR management.

Management Framework


42 The azbil Group’s CSR Management

43 Corporate Governance

44 Risk Management and Compliance

45 Board of Directors, Executive Officers,

and Corporate Auditors

Q: What is meant by “the azbil Group’s CSR?”Aiming for sustainable development of society and of our business, we contribute to society by means of both “basic CSR” and

“proactive CSR” activities that are unique to the azbil Group. Basic CSR includes fulfilling obligations with regard to legal compliance,

risk management, safety, quality, the environment, and other areas that are essential for the azbil Group as a corporate citizen.

Proactive CSR includes contributing to society through business operations and voluntary social contribution activities.

Q: What are your policies and targets for CSR management initiatives?Under our medium-term plan, we have divided our initiatives into six themes, with targets for each.

Compliance control A culture of thorough compliance that includes not only awareness but also employees’ continuous execution of business activities in a manner that prevents the occurrence of serious compliance issues in the Group’s business activities.

Operation with thorough risk management Full application of Group-wide risk management in areas including disaster preparedness, information security, quality, product liability, and accounting, under a comprehensive risk management system, as well as measures taken on an annual basis to ascertain and deal with key risks.

Promotion of business management that values people Strengthening of the foundation for CSR management that values people by promoting employee health and safety, better workplace environments, a more dynamic corporate culture, and improved motivation as well as establishing a human resource system to support these initiatives.

Contributions to preserving our natural environment Reduction of our own CO2 emissions and, through our business, active contributions to the reduction of CO2 emissions of our partner companies and society. In addition, comprehensive promotion of energy conservation measures to address electric power supply shortages.

Promotion of group management Strengthening of Group-wide governance by significantly enhancing the level of management-related practices in areas including internal control, risk management, and accounting at subsidiaries in Japan and overseas.

Strengthening social contribution activities Active promotion and support of social contributions through business operations and employee-participatory, voluntary social contribution activities.

CSR Promotion Framework

The azbil Group’s CSR Promotion Committee was established in order to promote and enact CSR activities for the Group as a whole

over a broad range of fields. The committee is composed of senior managers in charge of promoting CSR at individual Group

companies and members of the lead departments for each initiative. The committee promotes and controls overall CSR activities,

subject to the approval of the Board of Directors of Azbil Corporation, executing CSR initiatives, appraising their results, and reporting

to management.

The azbil Group believes that corporate social responsibility (CSR) is a key issue of corporate management. Under our medium-term plan, which began in fiscal year 2010 (ended March 31, 2011), as a global automation enterprise, we work to establish and practice CSR management that actively contributes to the economy, the environment, and society.

01

02

03

04

05

06

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Cooperation/Adjustments/Instructions

InstructionsProposals/Reports

CSR-related ProgressStatus Reported

Targets Set and ProgressManaged by Operational Plan

Approved PlanInstructionsSent to BusinessOperations

Internal Audit

InstructionsProposals/Reports

Basic CSR Proactive CSR

Domain of CSR Initiatives

CSR Promotion Framework

CSR

Compliance Information security

Disasterprevention

Financial reporting

Labor and safety Quality Environment

Management infrastructure and Group governance

Socialcontributionvia businessoperations

Voluntarysocial

contributionactivities

Board of DirectorsPolicy BoardAzbil

Group Companies/Divisions

Managers Responsible for CSR Themesazbil Group CSR Promotion Committee

13

4

2

5

The azbil Group’s CSR Management


Man

agem

ent

な

Corporate Governance

Board of Directors

Directors (9)Including 2 External Directors

Executive Of�cers (11)

Policy Board

President and CEO (1)Chairman (1)

Senior ManagingExecutive Of�cer (1)

Managing ExecutiveOf�cers (8)

Chairman and Representative Director (1)President and Representive Director (1)

Election/Dismissal

Audit

Audit

Assistance

Election/Dismissal

Election/ Dismissal

AuditElection/ Dismissal

General Shareholders’ Meeting

Corporate Governance Framework (As of June 26, 2012)

Board of Corporate Auditors

Corporate Auditors (5)Including 3 External Auditors

Election/Dismissal

IndependentAuditor

Audit/Guidance

Business OperationsCorporate Auditors’

Staff Of�ce

会役締取会役査監

監査役 4名（うち社外監査役 2名）

監査役室

取締役 9名（うち社外取締役 2名）

執行役員 9名

経営会議

執行役員社長 1名

執行役員専務 2名

執行役員常務 8名代表取締役社長 1名

選任・解任

監査

監査

選任・解任

選任・解任

会計監査選任・監督

株主総会

コーポレート・ガバナンス体制（2010年6月25日現在）

監査法人

選任・解任

監査・指導部進推制統部内室査監門部行執務業監査役室

Internal AuditDepartmentInternal ControlConduct DepartmentGeneral AffairsDepartment(CSR, Compliance)

In order to enhance corporate governance, Azbil Corporation has introduced an executive officer system that separates decision making from actual execution of Company policy to facilitate the prompt implementation of policy initiatives. In addition, the Board of Directors and the Board of Corporate Auditors oversee and monitor the execution.

Our Approach to Corporate GovernanceOur basic policy on corporate governance is to promote

policies that fulfill our social responsibilities based on good

ethical practices and that contribute to the welfare of the

community based on sound legal and regulatory compliance,

and we work to consistently increase enterprise value for the

benefit of our shareholders and all our stakeholders by

enhancing policies and schemes to realize highly efficient, fair,

and transparent business practices.

Framework for Corporate GovernanceBoard of Directors and Executive Officer System

The Board of Directors makes decisions on operational basic

policy, legal issues, and other important matters and oversees

the status of execution. Functional separation between the

executive officer system and the Board of Directors realizes

swift policy execution and strengthens the auditing of

execution. The Board of Directors convenes monthly, and for

executive personnel, management meetings comprising mainly

executive officers, with representatives of the Board of

Corporate Auditors also attending, are held twice monthly as

part of initiatives to further strengthen business operations

through prompt decision making and strict execution.

Corporate Auditor System and Internal Audits

Azbil uses a corporate auditor system in which five corporate

auditors including three external auditors are appointed, with

two of these auditors serving on a full-time basis. The corporate

auditors perform strict auditing of the business and policy

decisions of the Board of Directors and executive officers,

primarily from the perspective of legality. In addition, in order to

strengthen the auditing function, the Company has established

the Corporate Auditors’ Staff Office under the direct control of

the Board of Corporate Auditors, with special agents who assist

the corporate auditors in their duties. The corporate auditors

strengthen ties with accounting auditors and the Internal Audit

Office by means that include exchanging information and

opinions periodically, in order to improve the effectiveness and

efficiency of the audits. In addition, the Internal Audit

Department, which is directly under the President’s control,

regularly audits organizations and structures, the execution of

business, business risks, compliance, and internal control

systems and provides specific advice and proposals for

operational control and business improvement.

Current Framework

Azbil’s Board of Directors was composed of nine members as

of June 26, 2012, including six members that also have roles as

executive officers, and two external directors. The remaining

director is not an external director as defined by Japanese

company law, but possesses abundant global management

experience and wisdom accumulated over forty years. These

directors have the independence to provide oversight and

business advice from an external perspective in order to raise

the fairness, neutrality, and transparency of the Company’s

management.

Remuneration for Directors and Corporate Auditors

Azbil discloses the total remuneration for directors and

corporate auditors in its annual security report and notice of

annual shareholders’ meetings. In fiscal year 2011, ended

March 31, 2012, total remuneration paid to nine directors

amounted to ¥382 million (maximum permissible under

company rules: ¥450 million). For the eight corporate auditors

(including three corporate auditors who retired at the close of

the 89th general shareholders meeting held on June 28, 2011),

total remuneration amounted to ¥76 million (maximum

permissible: ¥120 million).


Risk management and compliance are essential components of management that is grounded in corporate social responsibility (CSR), and thus are key elements for the azbil Group if it is to maintain the trust of society and thereby continue to survive and thrive. We are working to manage the various risks entailed in doing business and to promote compliance throughout the Group.

Risk Management and Compliance

な

Osamu Murayama (left)Hiroshi Watanabe (right)

CSR Promotion Group membersAzbil Corporation


Risk ManagementThe azbil Group’s Total Risk ManagementThe azbil Group strives for meticulous risk management. Under our total risk management system, risks that could significantly impact our business are identified through comprehensive annual surveys of directors and managers of key departments, and then the Board of Directors prioritizes the azbil Group’s key risks for the coming year. These efforts are aimed at facilitating the implementation of Group-wide measures to prevent key risks from materializing. 　In consideration of factors such as changes in its management environment and business domains, revisions of laws and regulations, and incidents that create risks inside and outside the Group, the azbil Group revises the risks it surveys each year.

Disaster Prevention and Business Continuity PlanningIn fiscal year 2011, ended March 31, 2012, we conducted emergency disaster prevention inspections at all domestic business sites of the azbil Group in the wake of the Great East Japan Earthquake, identified problems, and initiated countermeasures. Furthermore, in order to strengthen the azbil Group’s overall disaster prevention, we improved our system for checking employee safety after a major earthquake, enhanced our communications infrastructure for disasters, and relocated to buildings that meet new earthquake-resistance standards, among other measures. 　Going forward, we will revise our business continuity plan to establish more robust disaster prevention and business continuity in addition to further strengthening our disaster prevention measures.

Information SecurityTo deal with information security risks, we have carried out a variety of initiatives such as ensuring thorough information security education of employees by means that include the use of e-learning, as in previous years; responding to information security issues brought to light by compliance awareness surveys; and upgrading our framework for managing important data and personal information.　We also relocated our network equipment and servers and upgraded our backup system to ensure that the operational level of services will not be significantly compromised during a disaster.

ComplianceBusiness Conduct Policy and Business Conduct GuidelinesOur Business Conduct Policy has been aligned with the azbil Group philosophy, and consists of six areas including the Group’s public responsibilities, social responsibilities, compliance with antitrust and other fair trade regulations, and respect for human rights. 　Based on the Business Conduct Policy, we assembled and implemented specific business guidelines as a code of conduct covering all business activities from the perspectives of legal compliance and ethical conduct. 　We have issued localized versions of these guidelines for each country in order to take into consideration local laws and business practices, based on a guideline template for our overseas subsidiaries created in fiscal year 2011.

Compliance Promotion FrameworkThe azbil Group’s Corporate Ethics Committee and departments in charge of compliance promotion are responsible for determining policy and promotion initiatives to ensure legal compliance and ethical behavior. The heads of departments and business office managers are designated as compliance managers and the heads of sections as compliance leaders, each of whom works to heighten awareness and ensure thorough compliance in each workplace. 　In addition, we conduct annual surveys of compliance attitudes among all azbil Group officers and employees to monitor the actual compliance awareness and behavior of each workplace. In turn, these surveys are used to ascertain issues and implement improvements.

Compliance EducationCompliance education sessions are held annually for all employees, including directors, corporate auditors, the heads of departments and sections, newly hired employees, newly appointed managers, and employees assigned to an overseas posting.

　Issues identified through compliance attitude surveys are reflected in the education curriculum, which uses specific case studies to encourage all employees to think about issues and make a thorough transition from thought into action.

　In addition, training sessions for in-house lecturers were held to develop their teaching skills in order to improve the quality of our compliance education.　We have offered compliance education sessions in factories and sales branches nationwide, covering almost everyone in the Group.

Seiji OnokiRepresentative Director Chairmanazbil Group General Management

Hirozumi SoneRepresentative Director President and Chief Executive Officerazbil Group General Management,Internal Audit Department,Corporate Planning Department

な

コーポレート・ガバナンス

Directors, Executive Officers

Makoto Yasuda Director (Independent Non-Executive Director)

Eugene H. LeeDirector (Independent Non-Executive Director)(External Director)

Katsuhiko TanabeDirector (Independent Non-Executive Director)(External Director)

Tadayuki SasakiExecutive Director Senior Managing Executive OfficerAssistant to the Presidentazbil Group CSR, Internal Control, Facilities and Business Institutions, Finance Department, Human Resources Department, General Affairs Department, Legal & Intellectual Property Department, Secretary Office

Masato IwasakiExecutive Director Managing Executive OfficerAdvanced Automation Company PresidentAdvanced Automation Business

役員の紹介2012年6月●日現在

Keiichi FuwaExecutive DirectorManaging Executive OfficerBuilding Systems Company PresidentBuilding Automation Business,azbil Group Operating Synergy

Makoto KawaiExecutive Director Managing Executive OfficerGeneral Manager, Production Management Headquartersazbil Group Production,azbil Group Purchasing

Corporate Auditors

Full-time Corporate Auditors

Tomohiko MatsuyasuKensei Sukizaki

Corporate Auditors (External Auditors)

Kinya FujimotoJyunichi AsadaKazuo Yamamoto

Executive Officers

Managing Executive Officers

Toshitsune OkuboGeneral Manager, International Business Headquarters

International Business, Document Production Department

Ichio KuniiGeneral Manager, Home Comfort Headquarters

Home Comfort Business

Yoshihide SuginoGeneral Manager, Technology Development Headquarters

azbil Group Environmental Load Innovation,

azbil Group Technology Development,

Corporate Quality Assurance Promotion,

Department of Safety Assessment

Kenji HidakaAdvanced Automation Business Sales

Mitsuharu MiyazawaService Business

General Manager, Tokyo Head Office

General Manager, Facility Management Headquarters

Building Systems Company

Executive Officers

Osamu TamayoriAssistant to Managing Executive Officer

Teruyoshi YamamotoGroup Finance

Assistant to Senior Managing Executive Officer

Takumi IshiguroBuilding Systems CompanyInstrumentation Sales

Assistant to President of Building Systems Company

Norio MuraseGeneral Manager, Legal & Intellectual Property Department

Nobuo ShimizuGeneral Manager, Kansai Regional Division

Advanced Automation Company

Haruo TamuraGeneral Manager, Kansai Regional Division


Hiroshi AraiGeneral Manager, Information Systems Department

azbil Group Information Systems

Seiichiro HayashiGeneral Manager, Engineering Headquarters


Hirohiko KazatoDeputy General Manager, Technology Development

Headquarters

New Business Development

Yoshifumi SuzukiGeneral Manager, Engineering Department


Kenji OkumuraGeneral Manager, Business Sales Headquarters


Board of Directors, Executive Officers, and

Corporate AuditorsAs of June 26, 2012

Man

agem

ent


Makoto Yasuda

April 1960 Joined the Company

August 1968 Resigned from the Company

October 1984 Chairman of Elders Pika

May 1987 President of Elders and Yasuda Limited

July 1990 President of Yasuda and Pama Limited

(presently Yasuda Makoto & Co., Ltd.)

(present post)

June 2000 Corporate Auditor of the Company

May 2001 Director of Li & Fung Limited

June 2006 Executive Director of the Company

(present post)

June 2007 Executive Director of KANEMATSU TEXTILE

CORPORATION (present post)

Eugene H. Lee

September 1970 Professor of International Business and

International Law at Sophia University

February 1973 President of International Investment

Consultants Ltd.

January 1982 President of Siemens Medical Systems

(presently Siemens Japan K.K.)

December 1990 Vice Chairman of Siemens K.K. (presently

Siemens Japan K.K.) (Representative of

Siemens Group in Japan)

June 2007 External Director of the Company

(present post)

Katsuhiko Tanabe

April 1973 Registered as a Lawyer

September 1979 Established TANABE & PARTNERS (present post)

April 1995 Deputy Chairman of Dai-ichi Tokyo Bar Association

April 1997 Vice-Chairman of Kanto Bar Association

April 1998 Managing Director of Japan Federation of

Bar Associations

June 2000 External Auditor of Sanwa Shutter Corporation

(presently Sanwa Holdings Corporation)

(present post)

June 2007 External Auditor of the Company

June 2010 External Director of the Company (present post)

October 2010 External Director of MIRAIT Holdings

Corporation (present post)

Tadayuki Sasaki April 1972 Joined The Fuji Bank, Limited

October 1999 General Manager of Project Finance Sales

May 2002 Joined the Company (Director)

April 2003 Executive Officer of the Company, Director of

Accounting & Finance

April 2006 Managing Executive Officer of the Company

June 2007 Executive Director, Managing Executive Officer of

the Company

April 2009 Executive Director, Senior Managing Executive

Officer of the Company (present post)

April 2012 Assistant to the President, In charge of azbil Group

CSR, Internal Control, Facilities / Business Sites,

Finance Department, Human Resources

Department, General Affairs Department, Legal &

Intellectual Property Department, Secretary Office

(present post)

Masato Iwasaki


April 2003 General Manager of Marketing 2nd Department and

Information Systems, Advanced Automation

Company

April 2005 General Manager of Solution Marketing, Advanced

Automation Company

April 2010 Director of the Company; General Manager of

Marketing, Advanced Automation Company

April 2011 Executive Officer of the Company; General Manager

of Marketing, Advanced Automation Company

April 2012 Managing Executive Officer of the Company;

President of Advanced Automation Company

(present post)

June 2012 Executive Director of the Company (present post)

Seiji Onoki


November 1994 General Manager of System Development

Headquarters; Industrial Systems Division


June 2000 President of Yamatake Industrial Systems

Co., Ltd. (presently the Company’s Advanced

Automation Company)


April 2003 Executive Director and Managing Executive

Officer of the Company; President of


June 2004 President and Chief Executive Officer of the

Company

April 2012 Chairman of the Company (present post)

In charge of azbil Group General

Management (present post)

Keiichi Fuwa


October 1998 Transferred to Yamatake Building Systems Co., Ltd.

(presently the Company’s Building Systems

Company), General Manager of Security Systems, Yamatake Building Systems Co., Ltd.

April 2003 General Manager of Building Automation Business

Headquarters, Tokyo Head Office, Building Systems

Company


Building Automation Business Headquarters, Tokyo

Head Office, Building Systems Company


of Osaka Branch, Building Systems Company


of 1st Sales Headquarters, Building Systems

Company


General Manager of Sales Headquarters and Tokyo

Head Office, Building Systems Company


President of Building Systems Company (present post)

June 2012 Executive Director of the Company (present post)

Makoto KawaiApril 1972 Joined the Company

November 1996 General Manager of Technology IV,

Product Development Headquarters,

General Manager of CV Production,

Product Production Headquarters,

Industrial Systems Division

June 2006 General Manager of Shonan Factory

April 2007 Director of the Company, General Manager

of Shonan Factory; Manager of IP

Production Headquarters, Advanced

Automation Company

April 2008 Executive Officer of the Company


June 2010 Executive Director, Managing Executive

Officer of the Company (present post)

April 2012 In charge of azbil Group Production,

Purchasing; General Manager of Production

Management Headquarters (present post)

Hirozumi Sone April 1979 Joined the Company

April 1996 General Manager of System Marketing, System

Development Headquarters, Industrial Systems

Division

October 1998 Transferred to Yamatake Industrial Systems Co.,

Ltd. (presently the Company's Advanced

Automation Company), General Manager of

Marketing

June 2000 Executive Director, General Manager of

Marketing, Yamatake Industrial Systems Co., Ltd.


Engineering Headquarters, Advanced

Automation Company

April 2005 Executive Officer of the Company, General

Manager of Corporate Planning

April 2008 Managing Executive Officer of the Company,

General Manager of Corporate Planning


June 2010 Executive Director, Managing Executive Officer

of the Company

April 2012 President and Chief Executive Officer of the

Company (present post)

In charge of azbil Group General Management,

Internal Audit Department, Corporate Planning

Department (present post)

Career Summary of the Board of Directors


Our Sustainability

For general information on our initiatives for sustainability,

please refer to http://www.azbil.com/csr/index.html

The azbil Group is focusing on strengthening its relationships with its many

stakeholders as part of its commitment to the sustainable development of

companies and society. This section introduces initiatives to strengthen our

relationships with the Group’s various stakeholders.

Sustainability


48 Relationship with Customers

50 Relationship with Local Communities

51 Relationship with Suppliers

52 Relationship with Employees

53 Relationship with the Environment

The azbil Group’s Initiatives to Offer Customers Safety and DependabilityFor the azbil Group, the term “products and services” encompasses products such as devices, equipment, software, and systems, as well as services such as engineering, installation, adjustment, maintenance, facility management, and in-home care. To ensure that all of these products and services pose no risk to our customers’ safety or peace of mind, we established the Basic Policy on the Safety and Dependability of azbil Group Products and Services, which is shown on the right.　At the same time, we set forth Rules on the Safety and Dependability of azbil Group Products and Services and shared them with Group companies in Japan and overseas in a proactive effort to ensure the safety and dependability of products provided by azbil Group companies. 　In addition, the entire azbil Group is committed to enhancing product quality. Efforts by each business department and each Group company are periodically reviewed by the azbil Group’s Quality Assurance Committee and shared throughout the Group.A report on product quality at each Group company is published monthly and distributed to the management of each company.

Basic Policy on the Safety and Dependability of azbil Group Products and Services

1. Observing lawsWe will observe laws pertaining to the safety and dependability of the products and services we provide.

2. Ensuring the safety and dependability of our products and servicesBy maintaining internal rules and standards for the safety and dependability of our products and services, having appropriate quality control, educating our employees and sub-contractors, and conducting appropriate inspection and monitoring, with continuous kaizen, we will ensure the safety and dependability of our products and services.

3. Providing safe and dependable products and servicesWe will plan and design our products and services from the customer’s point of view, recognizing that safety and the customer’s peace of mind are higher priorities than function, performance, and cost.

4. Cautions and information sharing for customers’ safety and peace of mindIn our manuals, catalogs, products labels, specification sheets, contracts, etc., we will include appropriate and sufficient precautions for safety and peace of mind and other useful information in order to ensure customers’ safe use with peace of mind.

5. Quick response to accidentsWe will proactively collect information about accidents of our products and services. If an accident happens, we will first care for customers’ safety and peace of mind, and quickly prevent a worsening of the situation, and then study the cause, and take countermeasures. We will also disclose appropriate information by means of reports, notices, etc., inside and outside the company.

Based on its Group Philosophy, the azbil Group proactively works to ensure the safety and dependability of its products and services, and has set forth both a statement of basic policy and a detailed statement of rules to ensure its continued ability to provide products and services that keep customers safe and contribute to their peace of mind.

Relationship with Customers

Quality Assurance Activity Monitoring System

Executive Officer in Charge of Quality Assurance

azbil GroupQuality Assurance Committee

Business Department

Quality Conference

Azbil CorporationCompany-wide Quality

Conference

Group CompaniesQuality Conference

Hideaki IshiiGeneral Managerazbil Group Quality Assurance DepartmentAzbil Corporation

TOPICSInitiatives to Enhance Group-wide Quality Management From the perspective of Group-wide quality management, the azbil Group

conducts enhanced quality education and human resource development,

customer-oriented product planning, and source management at the

development and design stages. We have initiated a campaign against

non-conformance in all production processes as we work to prevent the

delivery of defective products to our customers’ business sites.

　We will work to further improve our quality management in order to provide

products that offer greater satisfaction to customers.


Su

stainab

ility

Valve Maintenance Center in Thailand Plays Key Role in Rebuilding Customer’s FactoryI participated in a project to help restore operations at a major Japanese materials

manufacturer, doing maintenance work on valves that had been rusted by the flood

waters. All 200 or so valves were transported to our maintenance center in Rayong. So

that the valves for each process would be ready in time for the restart of operations, I

created a detailed process management sheet for all of the work required, and the

project turned out to be a Group-wide effort. The customer was very impressed that, no

matter what the request, we quickly traveled to their site and responded in a timely

manner. This helped to build such a strong relationship of trust that the customer stated

that they will get in touch with the azbil Group if any problems arise in the future. Our

ability to play a key role in helping many customers successfully rebuild, while

contributing also to Thailand’s reconstruction effort, has given our employees here a

strong sense of satisfaction and motivation.

Paitoon PromputSales Manager, Azbil (Thailand) Co., Ltd.

Efforts to Hasten Recovery in Disaster-Stricken Areas

The valve maintenance center in Rayong cleaned 200 water-damaged valves.

The azbil Group believes that its relationships with customers do not end with the sale of products. We work with customers on a daily basis to help resolve the challenges they face at their work sites. In the wake of the Great East Japan Earthquake and the floods in Thailand that occurred in 2011, the azbil Group promptly provided reconstruction assistance to help customers affected by these disasters to solve a variety of problems.

Helping to Restore the Infrastructure as a Unified Group In the Kanto area an oil refinery, one of our customers, was forced by the earthquake to undergo an emergency shutdown of its equipment. With the collaborative help of the azbil Group’s sales, service, and engineering divisions, after completing safety checks and restarting its plants one by one, this customer was able to resume tanker truck shipments from its refinery on March 14, just three days after the earthquake. Also, at the request of the national government, we helped to restart a thermal power plant that had suspended operations. 　To procure the necessary parts for these support activities, information about usage frequency, inventory levels, and supplier status was collected. Specifically, it was necessary to ensure the stable supply of parts to the infrastructure-related customers, who were the top priority, and at the same time to set up a supply framework that included designs using alternatives for parts that would likely be difficult to source.

Support for the Mental Well-Being of Elderly Disaster VictimsAzbil Care & Support Co., Ltd. (formerly Safety Service Center Co., Ltd.), which operates an emergency alert response service for elderly people who live alone, continued to provide services 24 hours a day, despite interruptions in public transportation that made it difficult for staff to come to work. The company confirmed the safety of each one of its customers in the disaster area and reported its findings to the appropriate local governments. It also worked to relieve customers’ anxieties after the

disaster by contacting local governments and medical institutions, etc., helping to provide peace of mind to many. 　Following the earthquake and tsunami, Azbil Care & Support provided the Nurse Phone-Anshin PendantTM, a mobile version of our emergency alert response service, allowing people to make contact or receive consultation at any time, in order to prevent the elderly from withdrawing from society or dying alone while in temporary housing. This service is currently being provided in the cities of Iwanuma in Miyagi Prefecture and Ofunato in Iwate Prefecture.

Putting Our Disaster Response Experience to Immediate Use Overseas Immediately after the floods in Thailand in 2011, we were inundated with requests to provide reconstruction assistance from more than 200 companies. We set up a reconstruction support office and dispatched personnel and supplies, working closely with Azbil (Thailand) Co., Ltd. As a result, we were able to provide a wide range of support, including the installation of alternative machinery and establishment of new supply chains, which helped many of our customers quickly return their operations to normal.


As members of society, we strive to contribute to the welfare of our fellow citizens by applying our “human-centered” approach on behalf of individuals, livelihoods, society, and the Earth’s environment. In addition to contributing to society through our business operations, our corporate culture is a stimulus for volunteer activity by our employees.

Relationship with Local Communities

Working with Business Sites – Making Social Contributions by Recycling Unwanted BooksIn December 2011, we established a program in which unwanted books from

various company departments are sold to second-hand bookstores, with the

proceeds donated to philanthropic groups. The idea originated from the person in

charge of discarding old materials used for research and development, who

suggested to the department handling CSR that the unwanted books could be

used to benefit society, rather than being simply thrown away. The department

handling CSR established a framework and informed employees of the program

to promote the participation of azbil Group employees throughout Japan.

Employees are also able to contribute unwanted books they have at home.

　As of April 2012, or nearly six months after the program’s inception, a total of

788 books were sold and about ¥50,000 in proceeds donated to the Japanese

Red Cross Society. We hope to expand the scope of this program to include the

entire azbil Group so that every employee has the opportunity to help out.

Activities in Fiscal Year 2011, Ended March 31, 2012The Sixth Shonan International MarathonSince 2006, the azbil Group has co-sponsored the Shonan International Marathon, an event that aims to be more environmentally friendly each year. 　As an “Eco Friendship” corporate leader, we coordinated the activities of six other participating companies, which included collecting and sorting recyclables at the venue and conducting eco craft making activities among children to foster their awareness of the environment. 　In addition, we calculated the total amount of energy used at the event to estimate CO2 emissions, and conducted an environmental impact analysis of the marathon’s effects on the surrounding environment.　Reaching its sixth year in fiscal year 2011, the marathon has grown to become the largest in Kanagawa Prefecture, with more than 23,000 runners taking part in 2011. About 220 azbil Group employees were involved as volunteers or runners.　This year we invited the participation of employee runners from all parts of Japan to further strengthen solidarity and interaction within the azbil Group on the occasion of the fifth anniversary of the “azbil” symbol. Employee runners came from as far north as Hokkaido and as far south as Kyushu. Runners sped through Shonan wearing the familiar azbil Group’s race t-shirt and race bibs with the azbil logo.

azbil Honey Bee Club The azbil Honey Bee Club is a volunteer organization established in 2009 to encourage participation in social contribution activities by azbil Group employees. Interested employees and officers can join the club with a donation of 100 yen or more. The club then makes donations to recipients selected by the members.　In fiscal year 2011, its second year of operation, the club decided to expand its scope to include providing assistance to groups and organizations through the payment of membership fees and donations. Members voted to provide donations to 32 organizations and groups involved in areas including social welfare, health and medicine, community environmental activities, international exchange for the environment, education and lifelong learning, sports and training, preservation of historical sites or traditional culture, and academic research. In total, the organizations received approximately ¥4 million in financial support from the Honey Bee Club and matching company contributions.　To assist areas affected by the Great East Japan Earthquake, the club helped to fund after-school activities at Ofunato Junior High School in Iwate Prefecture as well as emergency rations and supplies for future use through a program of the Japan Philanthropic Association. Also, club funds provided to charity organizations were used to supply a fishing vessel for the disaster area.

Fishing vessel for the disaster area supplied using azbil Honey Bee Club funds

Employees who participated in the marathon

From left:

Hiromi YamamotoSumie SaitoMasatoshi Hori Technology General Affairs GroupTechnology Development Headquarters Azbil Corporation

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Green Procurement and Related Evaluations The azbil Group’s procurement departments (materials and purchasing departments) have adopted a policy of using green procurement when sourcing materials. The environmental activities of suppliers are evaluated using the azbil Group Green Procurement Guidelines.

Green Procurement Evaluation Sheet (excerpts)

　

　The Green Procurement Promotion Committee performs evaluations by checking to see if the entries on the Green Procurement Evaluation Sheet completed by the supplier meet predetermined criteria. If the supplier fails to meet these criteria, a reconfirmation is performed on the status of its voluntary environmental initiatives and the supplier is requested to make greater efforts for environmental preservation. When necessary, we provide support, such as through the azbil Eco Program1, to assist in suppliers’ efforts to reduce their environmental

impact.

1. For suppliers that fail to meet the criteria on the Green Procurement Evaluation Sheet, we have set up the azbil Eco Program, which deals with environmental preservation activities based on the Ministry of the Environment’s “Eco Action 21 Guidelines,” which are easily implemented even by small businesses.

Examples of Evaluation Criteria

Green Procurement Promotion CommitteeRepresentatives from each procurement department in the azbil Group meet monthly to establish a fiscal year target for the Group’s green procurement rate, and then to monitor and assess the green procurement status of each supplier based on this target. The following graph illustrates trends in our green procurement rate2 since its implementation in fiscal year 2006, ended March 31, 2007. In fiscal year 2011, ended March 31, 2012, we achieved a green procurement rate of 96%, exceeding our target of 95%.

Green Procurement Rate

　　The Green Procurement Evaluation Sheet is valid for a period of three years, and members of the Green Procurement Promotion Committee regularly contact suppliers to monitor their status. We also work to maintain and improve our green procurement rate by actively following up with suppliers and helping them to improve their operations by providing guidance for environmental improvements and other measures. When necessary, we check the status of suppliers’ voluntary environmental initiatives through interviews or on-site visits.

役員の紹介2012年6月●日現在

Relationship with Suppliers

The azbil Group contributes to the preservation of the global environment by actively promoting green procurement, which prioritizes selection of materials with low environmental impact in order to provide environmentally friendly products and services to customers.

Frequency of Evaluation

Materials Procurement Department

Once every 3 yearsWhenever neededWhen commencing a new relationship with a new supplier

Acquired ISO 14001 certification Preparing to acquire ISO 14001 certificationImplemented other environmental management systemCreating other environmental management systemVoluntary environmental initiatives (12 items)

Environmentally friendly product designReduced resource use and chemical substance management of products and packaging (4 items)

Implementation Status of ISO 14001, etc.

Evaluation of Materials

2. Green procurement rate (%) =X 100

Total purchases from suppliers meeting Green Procurement Evaluation Sheet criteria

Total purchases from all suppliers

Department in Charge of Evaluation

Evaluation Criteria

60

80

100（％）

2006 2007 2008 2009 2010 2011 (FY)

76.5

80.7

94.7 95.3 96.1%97.3


Question

■ ISO 14001 implementation status

(1) Has your company (business site) acquired ISO 14001 certification?

■ Status of voluntary environmental initiatives

(2) Environmental philosophy/policy

・ We have established a philosophy and/or policy on the environment and make these known to employees in writing, displays, etc.

・ In our environmental policy, we pledge to comply with environmental laws and regulations and to prevent pollution.

■ Status of environmental initiatives for products

(8) Conserving resources and energy

・We design products using the 3Rs (reduce, reuse, recycle) to reduce resource use and waste, conserve energy and make disassembly easier.

(11) Management of chemical substances used in product packaging and compliance

・We are aware of and manage substances noted in Attachment 2 of the Chemical Substances Management Rules as prohibited or requiring reductions and management.

Answer Instructions

(Example)

Yes = 1 No = 2

Yes = 1No = 2

Yes = 1No = 2

Yes = 1No = 2

Yes = 1No = 2

We strive to create and maintain workplaces where all employees can work with peace of mind for many years to come. We are committed to creating job opportunities as well as fostering and deploying employees with diverse viewpoints, including women, foreign staff, senior citizens, and persons with disabilities. In that way we advance toward our goal of being a corporate group that never stops learning as we evolve to deal with a changing environment.

Relationship with Employees

Azbil Yamatake Friendly Co., Ltd.: A Special Subsidiary Employing Workers with Intellectual DisabilitiesAzbil Yamatake Friendly was founded as an azbil Group company in April 1998 with the aim of

creating a place where employees with intellectual disabilities can thrive and be active (ikiiki)1 as

integral staff members. The company’s management policy is to support employees’ skill

enhancement and self-realization through their work, helping them to contribute to society. It aims

to satisfy customers with its quality, pricing, and delivery as it takes on the challenges of better

work quality and speed with its attitude of “never turn down a customer request.”

　The entire azbil Group is helping to expand the scale of business of Azbil Yamatake Friendly

and supports the company’s independence in order to maintain and increase employment

opportunities for persons with disabilities.2

Notes:1. Ikiiki means “active,” but it is written with kanji characters in a special way that suggests that the workplace is an important

place in the lives of employees.2. The azbil Group has received approval to use special criteria in calculating its ratio of employees with disabilities (businesses are

required by law to employ persons with disabilities at or above a rate of 1.8% for private sector companies).

Creating Healthy Workplaces Where Employees Can ThriveIn October 2011, the azbil Group introduced its Occupational Health and Safety Management System (OHSMS) to maintain and enhance the safety and health of employees based on the creation of healthy, cheerful, and comfortable workplaces where employees can work with peace of mind for many years to come. Guidelines issued by the Ministry of Health, Labour and Welfare in March 2006 encourage companies in Japan to proactively introduce and build an OHSMS through a framework for phased enhancements in the occupational health and safety standards of business sites. 　Immediately after the October 2011 introduction of our OHSMS, we formulated a plan for internal audits, the first of which was conducted at a total of 29 business sites by the end of February 2012. We then went through the PDCA (Plan, Do, Check, Act) cycle to identify potential issues and implement remedial measures. This process also reaffirmed the importance of working to improve our health and safety standards by continuing to turn the PDCA cycle in the future.

Fostering and Deploying Human Resources for the “Period of Growth”We have been working to secure and foster the diverse human resources required to enter the ranks of top-class global enterprises under the azbil Group’s “Period of Growth” medium-term plan, and as we near its halfway point, we are redoubling our efforts to respond to the various changes taking place in our business climate.

Training for ManagersWe provide organized and systematic training for newly promoted managers to guide them in becoming key management resources for the company.

At the time of their promotion, managers go through training in the fundamentals of management, including the necessary practical experience in duties and workplace management. As they are promoted through the ranks from middle to senior management, managers receive training for the development of advanced skills and knowledge in leadership and strategic planning, as well as training outside the company to cultivate professional skills and knowledge related to management expertise. 　Going forward, training will place greater emphasis on enhancing managers’ abilities to identify and resolve issues in their daily work, in addition to developing the foundations of a corporate group that never stops learning and that evolves to deal with a changing environment.

Securing and Developing Human Resources for GlobalizationThe companies of the azbil Group around the world are stepping up human resource development programs that combine language study and correspondence courses in order to promote further globalization. These include training for presidents and executives of overseas subsidiaries to develop the future business leaders of the azbil Group and training for globally active human resources to develop personnel who can plan and initiate collaboration with multinational companies. 　Going forward, we will continue to develop and strengthen our human resources in order to enable our subsidiaries around the world to operate and manage their companies more independently.

Training globally active human resources

Azbil Yamatake Friendly(From left)

Toshihiko EnomotoIsehara Section ManagerGeneral Affairs Department

Masako KamiyaSection ManagerGeneral Affairs Department

Hajime MorohoshiDirector and General ManagerGeneral Affairs Department

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2012年6月●日現在

Relationship with the Environment

To contribute to the preservation of our environment, the azbil Group has formulated the azbil Group Environmental Charter, which is based on our Group philosophy, and we proactively work to reduce the environmental impact of our own business activities as well as to contribute to reducing society’s impact on the environment.

(Tons CO2/100 Millions of yen) (Tons CO2)

CO2 Emissions (left scale) CO2 Emissions per Unit Sales (right scale)

0

20,000

25,000

30,000

35,000

40,000

0

3.0

6.0

9.0

12.0

15.0

2006 2007 2008 2009 2010 2011 (FY)

14.1

33,182

13.412.8 12.5 12.2

10.533,293

30,138

26,581 26,831

23,549

Reducing the Environmental Impact of Our Business ActivitiesInitiatives for Reducing CO2 EmissionsTo help prevent global warming, the azbil Group is proactively working to conserve energy in its business activities. We have set a management policy to reduce our CO2 emissions for fiscal year 2013, ending March 31, 2014, by more than 10% from the level of fiscal year 2006, ended March 31, 2007. All employees are involved in this initiative, which is achieving results.⇨ See page 55 regarding conservation of energy and resources.

In addition, measures to deal with electricity usage restrictions imposed in summer 2011 contributed significantly to CO2 reduction.⇨ See page 57 regarding measures to deal with electricity usage

restrictions.

CO2 Emissions

* Scope is Azbil Corporation and its consolidated subsidiaries in Japan.* The figures for CO2 emissions use a fixed coefficient (0.378 kg CO2/ kWh).* The figures for CO2 emissions include estimates of air-conditioning energy and other figures.

Initiatives for Environmentally Friendly ProductsTo provide environmentally friendly products, services, and solutions, the azbil Group proactively promotes measures throughout all stages of the life cycle from development to disposal, including material selection, energy-saving design, reuse of materials, and environmental information disclosure.⇨ See page 56 regarding environmentally friendly product design.

Helping to Reduce Society’s Impact on the EnvironmentThe azbil Group proactively contributes to society by providing products, services, and solutions that support energy savings at its customers’ work sites.⇨ See page 54 regarding quantitative results in reducing

society’s environmental impact.

In addition, based on the recommendations of employees, we have initiated joint activities with local communities to protect the natural environment in order to help conserve local biodiversity.⇨ See page 58 regarding raising environmental awareness and

initiatives for local communities.

Environmental Management System Promotion FrameworkThe azbil Group Environmental Management Committee, led by the Environmental Management Officer, is responsible for the environmental management of the entire Group. The Committee promotes and reviews plans to improve the quality of the Group’s environmental management, including reducing the environmental impact of its own business activities as well as at its customers’ work sites through its core businesses.

Environmental Management System Promotion Framework

CEO, Azbil Corporation

Environmental Management Officer

azbil Group Environmental Management Committee

Azbil Corporation

Azbil Trading Co., Ltd.


Azbil Kimmon Co., Ltd.

Azbil Kyoto Co., Ltd.

Azbil RoyalControls Co., Ltd.

Azbil Taishin Co., Ltd.

Azbil Control Instruments (Dalian) Co., Ltd.

Azbil Hong Kong Limited


INPUT

525,000m3LPG

16.2million sheetsPaper

96.3klGasoline

118,000m3Water

LNG 195,000m3

33.3million kWhElectricity

52.4klKerosene

OUTPUT

16,758.9 tonsCO2 Emissions

621.8 tonsCO2 Emissions

1.0 tonsSOx Emissions

9.2 tonsNOx Emissions



39.7

CO Emissionsin our Business Operations

23,548.7 tons/year

tonsNOx Emissions

55.2 tons

Total Dischargeof Waste 1,718.7 tons


SOx Emissions 14.8 tons

1,324.7 kl

73,000 m3

Gasoline

LNG

Kerosene 12.9 kl

8.7 million kWh

14,000 m3

Diesel Oil

Electricity

LPG

36.0 million sheetsPaper

52.1 kl

• Green Procurement

• Global-Warming Countermeasures • Resource Conservation and Waste Reduction • Environmental Pollution Prevention

• Increased Transport Efficiency • Eco-Friendly Driving • Low-Emission Vehicles

• Environment- Conscious Design • Chemical Substance Control

• Global-Warming Countermeasures • Resource Conservation and Waste Reduction • Green Purchasing

• Energy Consumption Reduction • Reduced Use and Recovery of Packaging • Product Reuse

* Includes charter services and services by commissioned transport companies. Shipping services on consignment are not included.

23.9 klGasoline*

215.8 kl都市ガス都都都都都市都ガスDiesel Oil*

Development,

DesignProcurem

entProduction

DistributionSales

Use, Disposal, Recycling

INPUT

617,000 m3LPG


110.2 klGasoline

125,000 m3Water

LNG 250,000 m3

37.5 million kWhElectricity

55.8 klKerosene

OUTPUT


586.3 tonsCO2 Emissions






55.7 tonsChemical SubstanceAirborne Emissions

Total Dischargeof Waste 1,529.0 tons


SOx Emissions 16.8 tons

1,416.6 kl

78,000 m3

Gasoline

LNG

Kerosene 11.2 kl

10.1 million kWh

16,000 m3

Diesel Oil

Electricity

LPG


53.6 kl

• Green Procurement

• Global-Warming Countermeasures • Resource Conservation and Waste Reduction • Environmental Pollution Prevention

• Increased Transport Efficiency • Eco-Friendly Driving • Low-Emission Vehicles

• Environment- Conscious Design • Chemical Substance Control

• Global-Warming Countermeasures • Resource Conservation and Waste Reduction • Green Purchasing

• Energy Consumption Reduction • Reduced Use and Recovery of Packaging • Product Reuse

Scope: Azbil and consolidated subsidiaries in Japan

27.6 klGasoline*

199.0 kl都市ガスDiesel Oil*

* Includes charter services and services by commissioned transport companies. Shipping services on consignment are not included.

Chemical SubstanceAirborne Emissions

2

The azbil Group undertakes quantitative analysis of environmental impact and strives for preservation of the environment in all phases of the product life cycle, from development and design to use, disposal, and recycling. In addition, we calculate the reduction in environmental burden that we are able to achieve through our business operations.

Summary of Environmental Performance Data (Fiscal Year 2011, Ended March 31, 2012)

Reducing Society’s Impact on the Environment

We calculate the effectiveness of CO2 reduction in our Building

Automation business to assess our contribution to society.

Details are available on our website.

http://www.azbil.com/csr/eco/es/co2reduction.html

CO2 Reductionat Customers’ Sites

2.08 million tons/year

Material Balance and Reduction of Society’s Impact on the Environment


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Initiatives in Fiscal Year 2011, Ended March 31, 2012We worked to enhance our existing energy conservation initiatives and to roll them out across the entire azbil Group. This included launching the CO2 Reduction Diagnostic Team to help curb our CO2 emissions volume by means of energy conservation diagnoses at each business site. As a result, we were able to make concrete improvements in energy conservation. CO2 emissions for fiscal year 2011 were down 29% compared with fiscal year 2006, ended March 31, 2007, surpassing our target with a substantial contribution from our electricity conservation initiatives. 　As a result of our conservation of resources, we reduced the volume of paper used1 by 26% compared with fiscal year 2006. We introduced medium-to-long-term measures for total volume of waste generated and water used,2 which increased by 1.6% and decreased by 12.7%, respectively, on a per unit basis compared with the previous fiscal year.1. Scope: Azbil, Azbil Kyoto, and Azbil Taishin2. Scope: Azbil’s four main facilities (Fujisawa Technology Center and Shonan,

Isehara, and Hadano factories), Azbil Kyoto, and Azbil Taishin

Energy-Saving Initiatives at Azbil KyotoAzbil Kyoto Co., Ltd. is a key azbil Group producer of flow measurement equipment, including electromagnetic flowmeters and water meters. In addition to manufacturing electromagnetic flowmeters, water meters, and heat meters for industrial, air-conditioning, and water supply applications in Japan and around the world, Azbil Kyoto also has one of Japan’s largest flowcalibration rigs. In January

2010, Azbil Kyoto began offering calibration services for electromagnetic flowmeters made by other manufacturers. Because this initiative was expected to lead to greater energy usage, from the start Azbil Kyoto considered various energy-saving initiatives including the installation of a visualization system to monitor electricity, air, gas, and water usage.

Improving Operations with “Visualization”Energy conservation at Azbil Kyoto has centered on improvements through operational changes. Personnel in charge of each production process guided employees in a review to develop specific improvement targets for each process. When developing various ideas using a trial-and-error approach, visualizing the amount of electricity usage with Azbil Corporation’s EneSCOPETM energy management and analysis system and ENEOPTTMpers, an energy control optimization package, helped to efficiently verify the efficacy of initiatives and enabled immediate progress to the next step. The substantial results of this series of localized initiatives for each process led to a 13% year-on-year reduction in CO2 emissions. As part of its visualization-led operational improvements, the company changed the operating hours of the lifting pump used to supply large quantities of water for the flow calibration rig. This resulted in reduced power usage during peak demand, while the change in the amount of contracted electricity helped to significantly lower costs as well.　Looking forward, Azbil Kyoto will continue to implement operational improvements, consider facility improvements, and review further energy-saving measures.

Based on the azbil Group philosophy of contributing to global environmental preservation, we are actively promoting reduction of CO2 emissions. We have also cut back our use of paper through business process improvements and are working to reduce the volume of waste generated and water used.

Conservation of Energy and Resources

Promoting Energy Conservation Together with EmployeesIdeas for energy conservation were generated with the help of all our

employees. A call for proposals yielded 40 potential energy-saving

measures, which included everything from strings attached to the on/off

switches of fluorescent lights to hydroelectric power generation using the

water pressure of the elevated water tank. We decided to immediately

implement the zero-cost solutions using a trial-and-error approach. At

first it was tough to ask employees to cooperate because the

effectiveness of these measures was not apparent, but visualization of

electricity usage helped on-site leaders to verify effectiveness right away.

This in turn raised everyone’s awareness and motivated them to take the

lead. Various operational improvements, including changes in the

operating times of compressors, air-conditioning units, and hydraulic

pumps, have also helped us achieve significant results. I look forward to

continuing to promote energy conservation measures together with employees.

Elevated water tank for flow calibration rig

Akira ManoManagerQuality Management SectionAzbil Kyoto Co., Ltd. (Fiscal year 2011: Manager of Environment, Safety, and Conservation Section)

Lifting pump valves

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Initiatives for Environmentally Friendly ProductsThe azbil Group contributes to the global environment through its Building Automation, Advanced Automation, and Life Automation businesses. 　For our products, in addition to encouraging reuse, conservation of resources, and conservation of energy, we perform life cycle assessments, a method of quantitatively evaluating a product’s environmental impact. We also strictly control the use of hazardous chemicals in our products. 　Furthermore, we have implemented the azbil Eco Program to support the environmental activities of our suppliers with green procurement.

Environmental Initiatives for City Gas MetersOnce residential-use city gas meters have exceeded their 10-year certification period, they are collected, and after their parts are replaced and certified, they are put back into service. Consequently, our development of these meters takes their reuse into account from the initial design phase.

　In addition, we share product design specifications through the Japan Gas Meter Industry Association to ensure that any manufacturer can reuse any gas meter it has collected. Development of an Intelligent Gas Meter(Type J) for City GasAzbil Kimmon Co., Ltd. has developed an environmentally friendly intelligent gas meter (Type J) that offers the same performance as conventional units but with fewer parts, and it has now been adopted by all gas companies.

　

　This gas meter can be used for every type of household, from single-person low-flow homes to families with high flow volume. This helps reduce inventory compared with the current situation, where different sized meters are used for each flow volume category. 　We provide the product design specifications of this new gas meter to other city gas meter manufacturers. In this way the framework for reuse of city gas meters is maintained, and by the gradual replacement of current meters with this new model, we contribute to reducing society’s environmental impact.

To provide environmentally friendly products, services, and solutions, we are actively involved in material selection, energy-saving design, promotion of recycling, and information disclosure throughout the entire life cycle, from the development stage to disposal.

Environmentally Friendly Products

Reducing the Environmental Impact of City Gas Meters The Type J gas meter, designed to be used for a period of 30 years,

follows the basic design concept of the Type N gas meter, but uses fewer

parts, thanks to parts integration. Also, it incorporates new technologies

not found in the Type N. We are very happy that our product is recognized

for its reduced impact on the environment as a result of its 30% reduction

in weight, 20% reduction in volume, and 30% reduction in materials

compared to the Type NB6 gas meter.

　The Type J recently entered the mass-production phase. We faced a

couple of challenges, such as handling its installation method, which is the

reverse of that of the Type N, but because the Type J essentially

combines three gas meters into one we can now concentrate on reducing

our impact on the environment during the production process. We

continue to make improvements, with a dramatically changed production

line about every three months. In fiscal year 2011, we were able to reduce

man-hours by nearly two-thirds compared to our initial production.

Current product (Type N) and new product (Type J)

Jun IshizekiDevelopment DepartmentAzbil Kimmon Co., Ltd.

Naohiro Akutsu Nango Factory Azbil Kimmon Co., Ltd.

Ho

usehold

s

Gas C

om

panies

Gas M

eters

Recycling of gas meters that cannot be reused

Installation

10 years of use

Installation

Repetition of 2 and 3 every 10 years to achieve a 30-year period of use

○ New meters1

○ Collection2

○ Reuse3

Parts replacement, certification

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Initiatives in Fiscal Year 2011, Ended March 31, 2012A major issue in the summer of 2011 was dealing with electricity usage restrictions that were enacted based on Article 27 of the Electricity Business Act due to power shortages in Japan. The azbil Group decided to reduce its electricity consumption by 20% (year on year, peak usage), exceeding the mandatory 15% reduction stipulated by law, and rolled out various group-wide measures to meet this target. Through initiatives such as accelerating electricity conservation measures already in effect and shifting usage to off-peak hours, we were able to reduce our average daily peak electricity usage by more than 20% year on year and to contribute substantially to energy conservation. 　Within the azbil Group there were no serious violations of environmental laws or regulations in fiscal year 2011.

Development and Introduction of a Tool to Visualize Electricity Usage Azbil Corporation developed ENEOPTTMpers, an energy control optimization package to make electricity usage visible in real time, and introduced it at the main business sites of azbil Group companies in Japan before the start of summer electricity conservation. Through the Group’s intranet, any employee was able to check real-time electricity usage data on the targeted sites, allowing for effective employee-led conservation activities. We also made active use of the package to support our customers’ electricity conservation efforts.

Electricity Conservation Efforts at the Fujisawa Technology CenterThe Fujisawa Technology Center in Kanagawa Prefecture is one of our primary business sites, with approximately 1,800 employees. It is an important site for our electricity conservation measures, which are adapted to individual building specifications. One building in particular, which has been promoting energy visualization, incorporated its own unique approach to high-priority measures such as shifting usage to off-peak hours, controlling power demand, and employee-led electricity conservation. In order to shift power usage to off-peak hours, the entire building was pre-cooled prior to working hours, when power usage was not restricted. Then, during the period subject to usage reductions, cooling was accomplished using only ice generated with nighttime electricity and kept in thermal energy storage. Our proprietary forecasting technology, which incorporates weather forecast information, was also used to minimize the pre-cooling required. Additionally, an incentive-type control system was introduced that allowed a lower indoor temperature setting if lights were turned off. A system introduced on a trial basis allowed employees to take the lead in setting the indoor temperature for each workday. 　These initiatives helped cut peak electricity consumption on every workday subject to power usage restrictions by more than 40% at the building and by some 30% for the entire Fujisawa Technology Center, greatly exceeding the target.

The azbil Group considers its observance of environmental laws, regulations, and other requirements in Japan and overseas to be important from the perspectives of CSR and risk management. The Group is promoting electricity conservation, with intensive efforts in the summer to deal with electricity usage restrictions.

Compliance with Environmental Laws and Regulations

Employee-led Electricity Conservation EffortsTo conserve electricity, the Fujisawa Technology Center has expanded

the scope of its existing energy conservation initiatives and promoted

various interdepartmental cooperative measures. Efforts include

relocating testing equipment and managing waste heat from constant-

temperature ovens. However, as has always been the case with

conventional energy-saving initiatives, the enhanced awareness of

every employee has proven to be a significant driving force supporting

conservation. Not only the head office, but also each department

conducted electricity conservation patrols, as the efforts of all

employees helped to significantly reduce the site’s overall energy

consumption. Summer 2012 will likely require the same measures that

were implemented in 2011. We are committed to continuing with these

employee-led electricity conservation initiatives as we seek to resolve

the issues that surfaced in the summer of 2011, balancing

conservation with productivity and comfort.

Fumitoshi SatoManagerEnvironmental Safety Section Fujisawa Technology CenterAzbil Corporation

Akio KatsukuraDirectorProduction Administration DepartmentProduction Management Headquarters(Fiscal year 2011: Manager Business Section Fujisawa Technology Center)Azbil Corporation

Visualization of electricity usage

Individual control of overhead lighting

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The azbil Group aims to further raise the environmental awareness of its employees and their families by helping them to understand that environmental issues have a direct impact on them. To this end, our business sites work with local communities to conduct environmental preservation activities.

Environmental Awareness and Initiatives for Local Communities

Environmental Preservation Activities with the azbil GroupWe have completed the first year of activities under our agreement with

the azbil Group. We never considered actively preserving the maiden

lily, even though we know it is a rare flower, because we took for

granted the fact that it grows naturally. As a result, the environmental

preservation activities undertaken together with the azbil Group were

new and gratifying. These activities have motivated us to protect the

maiden lily, and we are in the process of developing innovative

methods for further propagation.

In Minamiaizu there are many ways to experience nature, including

Takashimizu Nature Park and Miyatoko Marsh. We hope to work

together with the azbil Group for many years to come on a variety of

environmental preservation and environmental education activities.

Launch of Biodiversity InitiativesThe azbil Group stresses the importance of raising the environmental awareness of its employees as the basis for reducing the environmental impact both of its own business activities and of society. So when employees expressed a desire to help the environment in other areas beside their own business activities, we started biodiversity preservation activities with the hope of enhancing environmental awareness as the basis for changing the business activities of the azbil Group. 　Azbil Corporation entered into agreements with the city of Fujisawa in Kanagawa Prefecture, the location of the Group’s largest business site, the Fujisawa Technology Center, in January 2011 and with the town of Minamiaizu in Fukushima Prefecture, the location of the Nango Factory belonging to Azbil Kimmon Co., Ltd., in July 2011 and launched activities in both areas. Each was the first time that Fujisawa or Minamiaizu had made such an agreement with a private-sector company.

Greenery Preservation Activities in FujisawaEach local community faces its own unique challenges when it comes to preserving the environment. The challenge facing Fujisawa was the large number of green spaces in the city that have been left unmaintained. Under the guidance of Fujisawa

Green Staff, a local non-profit organization, we are helping to create an open space with a large cherry tree in the center at one of these sites to make more sustainable use of the city’s green spaces.

　For the first activity in May 2011, employees and their families, twenty participants in all, made a walking path and thinned a wooded area to let more sunlight in.

Preserving Maiden Lilies in MinamiaizuMinamiaizu, located in southwestern Fukushima Prefecture, is famous for clusters of himesayuri (Lilium rubellum), or maiden lily. This plant is designated as a near threatened species on the Red List of the Ministry of the Environment of Japan, and the town decided to conduct preservation activities. For the first activity in October 2011, Azbil Kimmon employees and their families, totaling 33 participants, worked with members of the local community to clear underbrush, sow seeds, and plant bulbs. 　Generally it takes at least four years for a cultivated maiden lily to bloom after its seeds are sown, and more than 10 years for an uncultivated maiden lily that grows naturally, so the activities will continue.

Mr. Jinetsu Kondo DirectorMinamiaizu Municipal Government, Nango General Branch Office

Mr. Yoshimitsu BabaPromotion Section ChiefMinamiaizu Municipal Government,Nango General Branch Office

Greenery preservation activities

Maiden lily

Planting maiden lily bulbs


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For general information on our financial results and investor relations,

please refer to

http://www.azbil.com/ir/index.html

Our PerformanceFinancial Section


60 Financial Review

64 Consolidated Balance Sheet

66 Consolidated Statement of Income and Consolidated Statement of Comprehensive Income

67 Consolidated Statement of Changes in Equity

68 Consolidated Statement of Cash Flows

69 Notes to Consolidated Financial Statements

82 Independent Auditor’s Report


Consolidated Results

Net SalesIn fiscal year 2011, ended March 31, 2012, sales rose ¥4,283 million, or 2.0%, year on year to ¥223,499 million amid the continuing uncertain outlook in the business environment for the azbil Group. This result comes from the azbil Group’s emphasis on activities aimed at securing and expanding sales and its efforts to minimize the impact on the Group’s business from the Great East Japan Earthquake and the Fukushima Daiichi nuclear power plant accident. Detailed breakdowns are available in the “Our Operations” section starting on page 29, but summaries are as follows.

Building Automation BusinessIn the domestic market, there was a drop in sales for the business related to new buildings as well as for the business targeting existing buildings; in the business for existing buildings there had been several large-scale projects in the previous fiscal year. However, the service business grew steadily, and as a result there was an increase in overall sales for the domestic market compared to the previous fiscal year.

In the business related to existing buildings, owing to concerns about possible power supply shortages and increases in the cost of electricity, there has continued to be a strong demand for energy-saving measures; the number of customer inquiries has been correspondingly high. Nevertheless, because of a sense of uncertainty regarding future business conditions, there is still a tendency among many customers to postpone large-scale investments aimed at upgrading their facilities. In the service field, however, business performance benefited from staff making proactive energy-saving proposals to generate add-on contract work and also expanding business into new areas.

Abroad, the azbil Group has traditionally had an advantage in the overseas market for factories operated by Japanese companies, but it is now also engaged in developing the non-Japanese market by forming tie-ups with local enterprises, making use of the fact that in Japan the azbil Group has unrivalled experience and energy-saving expertise. This approach has resulted in steady sales growth.

As a result, sales in the Building Automation business rose ¥1,772 million, or 1.7%, year on year to ¥103,896 million.

Advanced Automation BusinessIn Japan, sales of control products for the factory automation (FA) market took a downward turn, resulting in less sales than the previous

fiscal year. It is true that at the start of the fiscal year there was rapid growth in domestic demand in such markets as semiconductor manufacturing equipment; this was helped in part by recovery efforts in the wake of the March 11 disaster. However, midway through the fiscal year, demand fell as a result of a weakening in capital investment and inventory cutbacks. On the other hand, sales increased for such field instruments as transmitters as well as for system products in the energy- and functional materials-related markets. Consequently, in the domestic market as a whole sales grew.

Overseas, there was a fall in sales for control products in the FA market, but sales of valves and field instruments expanded and, despite the negative impact of exchange rates, overall sales increased. With their potential for growth, these overseas markets are of special importance to the azbil Group, and it is striving to upgrade local engineering and maintenance capabilities. As part of this initiative, progress has been made in bolstering the valve maintenance facilities at key locations in China, Thailand, and Taiwan, as well as in other countries. For example, in October 2011 the Technical Service Center in Singapore was relocated and enlarged.

As a result, sales in the Advanced Automation business were up ¥3,159 million, or 3.9%, year on year to ¥84,134 million.

Life Automation BusinessThe Life Automation business covers a wide variety of fields closely connected with people’s everyday lives: it markets lifeline-related measuring equipment; it provides health and welfare and nursing care; and it also sells central air-conditioning systems for homes that ensure a comfortable and healthy environment while contributing to energy saving. Azbil Kimmon Co., Ltd. – a company that plays a central role in the lifeline field and accounts for the bulk of Life Automation business sales – produces and sells gas and water meters. The Fukushima Daiichi nuclear power plant accident did mean that operations at some of the company’s production facilities in the Tohoku region had to be temporarily suspended. Although the company’s situation has now returned to normal, sales figures fell as a result of the accident and the fact that LP gas meter sales are depressed in the off-demand season.

Turning to the Life Assist field – with its nursing care and emergency alert response services – demand is steadily growing as Japan’s population ages. However, with cutbacks in welfare budgets by local governments, etc., the business environment is challenging. In response, various measures have been adopted, such as launching new products, increasing the number of service sites, and expanding the scope of

2007 2008 2009 2010 (FY) (FY)

(FY) (FY) (FY)

0

100

200

300

0

10

20

30

149.5

12.4

Net Sales

(Billions of yen) (%)

(%)(Times)

(%)

0

50

100

150

200

0

50

65 9

6

3

0

55

60

Cost of Sales/Ratio to Net Sales(Billions of yen)

2007 2008 2009 2010

Operating Income/Net Income/Operating Income to Net Sales(Billions of yen)

2007 2008 2009 20100

50

150

100

200

250

300

Total Assets/Asset Turnover

(Billions of yen)

2007 2008 2009 20100

50

100

200

150

0

30

40

50

60

0

0.2

0.4

0.6

0.8

1.0

1.2

Equity/Shareholders’ Equity* Ratio

(Billions of yen)

2007 2008 2009 2010

0

(10)

10

20

Net Change in Cash and Cash Equivalents

(Billions of yen)

10.710.7 9.59.5

6.26.26.2

20.517.8

248.6 236.2212.2

(4.9)

228.8 220.8 218.5

121.7 125.0 129.3

1.08 1.0552.6 55.9

58.40.97

63.8 63.364.0

8.27.6

5.8135.8

158.6

Cost of Sales (left scale) Operating Income Net Income (left scale)

Total Assets (left scale)

Asset Turnover (right scale)

Equity (left scale)

Shareholders’ Equity* Ratio (right scale)

* Shareholders’ Equity = Total equity – Minority interests

Operating Income to Net Sales (right scale)

11.0

2011 2007 2008 2009 2010 (FY)2011

14.9

2011

2011 2011 2011

223.5

131.4

59.61.01

63.8

6.8142.7

4.5

14.1

Ratio to Net Sales (right scale)

219.2

63.6

139.5

14.3

6.4

1.01

223.5135.1

59.8

(4.5)

142.7

7.97.9 8.58.5

228.8 217.5


Financial Review


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services offered. This approach has succeeded in increasing sales.As regards the market for residential central air-conditioning systems,

the sales force has been reinforced and an aggressive strategy targeting both house builders and individual owners has been adopted. As an example of the latter, a showroom (Platz Kikubari) has been set up inside one of Japan’s largest permanent housing exhibitions, tvk Housing Plaza Yokohama. These efforts have led to increased sales.

While the Great East Japan Earthquake and the Fukushima Daiichi nuclear power plant accident did affect Azbil Kimmon, thanks to vigorous efforts aimed at a quick operational recovery, the impact was relatively small. There was also sales growth in the Life Assist field (nursing care, lifestyle support services, etc.) as well as for residential central air-conditioning systems.

As a result, sales in the Life Automation business fell ¥78 million, or 0.2%, year on year to ¥32,543 million.

OtherSales decreased ¥214 million, or 4.2%, year on year to ¥4,909 million.

Operating IncomeCost of sales totaled ¥142,659 million, and the cost of sales ratio increased 0.2 percentage points to 63.8%. The increase was largely due to increased outlays for social insurance premiums (rate changes for employee pensions and health insurance) and retirement benefits expenses, etc., as well as price pressures, which were only partially offset by the Company’s efforts to rationalize and curb expenditures while enhancing the business structure.

Selling, general and administrative expenses increased ¥1,674 million to ¥66,492 million, also due to higher social insurance premiums and retirement benefit expenses and other expenses. The ratio of selling, general and administrative expenses to sales increased 0.2 percentage points to 29.8%.

As a result, operating income decreased ¥548 million, or 3.7%, year on year to ¥14,348 million. By business segment, segment profit (operating income) for the Building Automation business decreased ¥1,421 million, or 12.1%, year on year to ¥10,328 million, and segment profit (operating income) for the Advanced Automation business increased ¥772 million, or 23.9%, year on year to ¥4,006 million. For the Life Automation business, segment loss (operating loss) was ¥128 million, compared with segment loss (operating loss) of ¥227 million in the previous fiscal year. Segment profit (operating income) for the Other segment decreased ¥1 million, or 1.4%, year on year to ¥143 million.

Net IncomeOther Income (Expenses)Other income–net was ¥459 million, compared with other expenses–net of ¥1,170 million in the previous fiscal year. Major factors were dividend income totaling ¥277 million, a decrease of ¥193 million compared with the previous fiscal year, and gain on sales of investment securities-net of ¥2 million, a decrease of ¥174 million compared with the previous fiscal year, offset by foreign currency exchange loss of ¥38 million, a decrease of ¥435 million compared with the previous fiscal year. Others–net included compensation income of ¥318 million, profits from negative goodwill of ¥197 million, and gain on transfer of business of ¥184 million. In addition, non-recurring expenses including environmental expenses of ¥572 million and loss on adjustment for changes of accounting standard for asset retirement obligations of ¥266 million were recorded in other expenses in the previous fiscal year.

Income before Income Taxes and Minority Interests / Income TaxesIncome before income taxes and minority interests increased ¥1,081 million, or 7.9%, year on year to ¥14,807 million. Total income taxes increased ¥466 million, or 8.4%, to ¥5,983 million. The actual effective income tax rate on income before income taxes and minority interests was 40.4%, an increase of 0.2 percentage points from the previous fiscal year, while minority interests in net income increased ¥24 million, or 8.6%, to ¥305 million.

As a result of the above factors, net income increased ¥591 million, or 7.5%, year on year to ¥8,519 million.

Financial Position

AssetsTotal assets at March 31, 2012 increased ¥5,975 million, or 2.7%, from the previous fiscal year-end to ¥223,476 million. This was primarily due to an increase in notes and accounts receivable–trade of ¥9,496 million.

LiabilitiesTotal liabilities at March 31, 2012 increased ¥2,260 million, or 2.6%, from the previous fiscal year-end to ¥88,399 million. This was primarily due to an increase of ¥3,239 million in notes and accounts payable–trade.

2007 2008 2009 2010 (FY) (FY)

(FY) (FY) (FY)

0

100

200

300

0

10

20

30

149.5

12.4

Net Sales

(Billions of yen) (%)

(%)(Times)

(%)

0

50

100

150

200

0

50

65 9

6

3

0

55

60

Cost of Sales/Ratio to Net Sales(Billions of yen)

2007 2008 2009 2010

Operating Income/Net Income/Operating Income to Net Sales(Billions of yen)

2007 2008 2009 20100

50

150

100

200

250

300

Total Assets/Asset Turnover

(Billions of yen)

2007 2008 2009 20100

50

100

200

150

0

30

40

50

60

0

0.2

0.4

0.6

0.8

1.0

1.2

Equity/Shareholders’ Equity* Ratio

(Billions of yen)

2007 2008 2009 2010

0

(10)

10

20

Net Change in Cash and Cash Equivalents

(Billions of yen)

10.710.7 9.59.5

6.26.26.2

20.517.8

248.6 236.2212.2

(4.9)

228.8 220.8 218.5

121.7 125.0 129.3

1.08 1.0552.6 55.9

58.40.97

63.8 63.364.0

8.27.6

5.8135.8

158.6

Cost of Sales (left scale) Operating Income Net Income (left scale)

Total Assets (left scale)

Asset Turnover (right scale)

Equity (left scale)

Shareholders’ Equity* Ratio (right scale)

* Shareholders’ Equity = Total equity – Minority interests

Operating Income to Net Sales (right scale)

11.0

2011 2007 2008 2009 2010 (FY)2011

14.9

2011

2011 2011 2011

223.5

131.4

59.61.01

63.8

6.8142.7

4.5

14.1

Ratio to Net Sales (right scale)

219.2

63.6

139.5

14.3

6.4

1.01

223.5135.1

59.8

(4.5)

142.7

7.97.9 8.58.5

228.8 217.5


azbil report 2012 6362 azbil report 2012 azbil report 2012 63

EquityTotal equity at March 31, 2012 increased ¥3,715 million, or 2.8%, from the previous fiscal year-end to ¥135,077 million. This was primarily the result of an increase in retained earnings due to net income recorded for fiscal year 2011.

A year-on-year comparison of asset performance indicators (simple average at beginning and end of year) is as follows.

Receivables/sales (days): Increased 7 days to 132 days*Inventories/cost of sales (days): Decreased 2 days to 38 daysAsset turnover (times): 1.01 times (same as in the previous fiscal year)Shareholders’ equity ratio: Increased 0.2 percentage points to 59.8%

* This was mainly owing to an increase in notes and accounts receivable-trade related to sales growth and the closing day falling on a holiday.

Per Share Data

Net income per share increased ¥8.00 year on year to ¥115.35, and net assets* per share rose ¥53.62 to ¥1,808.48.

* Net assets are presented as total equity in the consolidated balance sheet.

Cash Flows

Cash and cash equivalents (hereafter, net cash) provided by operating activities in fiscal year 2011, ended March 31, 2012, decreased ¥9,589 million, or 63.0%, year on year to ¥5,634 million. This was primarily due to an increase in notes and accounts receivable, mainly reflecting sales growth and the closing day falling on a holiday, as well as an increase in income taxes–paid.

Net cash used in investing activities was ¥3,549 million, an increase of ¥1,273 million from the previous fiscal year. This was primarily due to a decrease in proceeds from sales of investment securities.

Net cash used in financing activities decreased ¥1,608 million year on year to ¥6,393 million. The primary reason was a decrease in cash outflow from the repayment of debt.

As a result of the above factors, cash and cash equivalents on March 31, 2012, the end of fiscal year 2011, decreased ¥4,488 million, or 7.5%, from the previous fiscal year-end to ¥55,356 million.

Outlook for Fiscal Year 2012, Ending March 31, 2013

For fiscal year 2012, we forecast a year-on-year increase of 2.9% in sales to ¥230,000 million, an increase of 4.5% in operating income to ¥15,000 million, and an increase of 5.6% in net income to ¥9,000 million.

By business segment, in the Building Automation business, we forecast year-on-year increases of ¥3,104 million, or 3.0%, in sales to ¥107,000 million, and ¥172 million, or 1.7%, in segment profit (operating income) to ¥10,500 million. In the Advanced Automation business, we forecast year-on-year increases of ¥7,866 million, or 9.4%, in sales to ¥92,000 million, and ¥994 million, or 24.8%, in segment profit (operating income) to ¥5,000 million. In the Life Automation business, we forecast a year-on-year increase of ¥457 million, or 1.4%, in sales to ¥33,000 million, and a segment loss (operating loss) of ¥500 million. For the Other segment, we forecast a year-on-year decrease of ¥4,809 million, or 98.0%, in sales to ¥100

million and segment loss (operating loss) of ¥0 million. From fiscal year 2012, some operations within the Other segment will be transferred to the Advanced Automation business.

Our view of the business environment that forms the basis of this outlook, and measures we will take to adapt to this business environment, are as follows.

Even as economic conditions continue to be challenging, a gradual pickup is envisaged. Nevertheless, there will still be concern regarding the debt crisis in Europe; this, combined with worries about the uncertain U.S. economic recovery and an economic slowdown in China, means that business sentiment will reflect a heightened sense of caution. Moves to correct the high value of the yen have proved to have only a limited effect, and sluggish foreign demand and concerns about the yen appreciating again will serve to dampen any recovery in the performance of Japan’s export-related industries. The business environment of the azbil Group will continue to be uncertain. While there are expectations for growth – such as a recovery in capital investment by manufacturing industries in Japan and abroad, and increased investment in energy-saving measures by businesses facing constraints on their power consumption as well as increases in the cost of electricity – it is also expected that severe price pressures will continue to beset the Building Automation business in the market for new buildings.

Taking these conditions into account, and aiming to achieve its earnings forecast for fiscal year 2012, the azbil Group will work toward the steady realization of measures designed to ensure profits. Leveraging the achievements already made in the reforms of business and operational structures, we will push forward with the transformation to a robust business structure that can cope with such changes in market structure as downward pressure on prices. And we will aim to expand the scope of our businesses from a global perspective.

Risk Management

The following are some of the risks that could affect the azbil Group’s business results and financial position. Assessments of these risks are conducted annually, and management and relevant divisions take measures to reduce risks and to respond when the risks materialize. Forward-looking statements are based on the Group’s judgments at the end of fiscal year 2011, ended March 31, 2012.

Risks Related to the Business Environment and Business ActivitiesEffect of Economic Downturn or StagnationStructural factors make demand for the azbil Group’s products and services susceptible to fluctuations in the economy and their effects on markets related to the Group, including the construction, manufacturing, and equipment manufacture markets. A large-scale downturn in business conditions and a decrease in demand from these markets could have an adverse impact on the Group’s operations, business results, and financial position.

Risks Related to CompetitionCompetition is becoming severe in the azbil Group’s business fields, which are the Building Automation business, Advanced Automation business, and Life Automation business. Under the circumstances, the azbil Group believes that its products and services offer high added value unmatched by other companies in terms of technology, quality,



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and cost. While the Group is taking measures to prepare for situations such as intensifying competition or the entry of new competitors, unexpected changes in relationships among competitors could have an impact on the Group’s business results and financial position.

Risks Related to the Group’s Product QualityThe azbil Group’s products, systems, and services are used for vital measurement and control related to safety and quality in a variety of plants and buildings. The Group has established a committee to oversee quality assurance and has enhanced its quality control system through sharing and transparency of quality information. Furthermore, the Group has taken out insurance policies, giving due consideration to damages for product liability. However, an incident caused by defects in the Group’s products, systems, or services could result in substantial costs and severely damage the Group’s credibility with customers. This in turn could have an impact on the Group’s operations, business results, and financial position.

Risks Related to R&D ActivitiesThe azbil Group has positioned the management of research and development activities as one of its top priorities. Based on the Group philosophy of “human-centered automation,” the Group is carrying out research and development activities aimed at the conservation of resources, energy and labor; safety; environmental preservation; and the realization of comfortable environments.

The azbil Group is strengthening its efforts to deliver appealing products and services to its customers in a timely fashion based on an accurate perception of their needs. However, a misreading of these needs or technological trends, postponement of research and development, insufficient technological capabilities, or other factors could delay the market launch of new products and have an adverse impact on the Group’s operations, business results, and financial position.

Risks Related to Global Operations The azbil Group conducts business overseas, mainly in Asia, through 25 local subsidiaries and two branches. In the rapidly growing Chinese market, the Group conducts product sales, manufacturing, instrumentation work, and other businesses locally through 10 subsidiaries. The Group has established manufacturing bases in Dalian and Shenzhen, where products are manufactured for the Japanese market. While the Group continues to expand its business globally, being mindful of the decentralization of country risk, delays in its expansion plans, unexpected changes in the political and economic condition, currency fluctuations, local legal, regulatory, and other reforms, natural disasters, terrorism, strikes, and other developments in countries where it has advanced could have an impact on the Group’s business results and financial position.

Other RisksRisks Related to Securing and Developing Human ResourcesSince its founding, the azbil Group has focused on developing human resources based on the view that its employees are a valued asset, the source of corporate cultural renewal, and the creative source of its corporate value. However, possible future issues such as ensuring the safety and health of employees, measures to deal with the ageing of the workforce, the succession of technologies, expertise, and know-how, cross-training for multifunctional workers, and the retention and

development of human resources for domestic and international business expansion could have an impact on the Group’s business results and financial position.

Risks Related to Information LeakageThe azbil Group possesses critical information on businesses and confidential information including personal information and information on business partners that is obtained in the course of business. The Group is taking measures to strengthen its handling and management of information and increase employees’ informational literacy. However, leakage of this type of information due to unforeseen reasons could have an impact on the Group’s business results and financial position.

Risks Related to DisastersFour of the six domestic production bases (including manufacturing subsidiaries) of the azbil Group’s Building Automation and Advanced Automation businesses are concentrated in Kanagawa Prefecture. In addition, four of the seven domestic production bases of Azbil Kimmon Co., Ltd. involved in the Life Automation business are concentrated in Fukushima Prefecture. The Group has taken actions as necessary including implementing safety precautions, taking out insurance, and establishing a business continuity plan (BCP) to maintain operations and/ or quickly return operations to normal. However, any direct or indirect effect due to a large-scale disaster or other incident in these areas could have an impact on the Group’s business results and financial position. In fiscal year 2011, the temporary shutdown of the azbil Group’s factories due to the earthquake and nuclear power plant accident had an impact on the Group’s profits, but the Group minimized the impact by taking the measures mentioned above.

Risks Related to Laws and RegulationsThe azbil Group is subject to laws and regulations in the countries where it operates, including licensing for operations and investment, environmental and safety standards, and product standards. Unexpected changes in these laws or regulations, or the establishment of new laws or regulations, could have an impact on the Group’s business results and financial position.

In particular, although the azbil Group is proceeding with a variety of measures to reduce its environmental impact, in part to comply with stricter environmental regulations, difficulty in complying with environmental regulations may result in the cessation of certain business activities or damage to the trust placed in the Group. This could have an impact on the Group’s business results and financial position.

Risks Related to Intellectual Property RightsThe azbil Group accumulates differentiated technologies and know-how in the development of products and services within the Group and works to protect its intellectual property rights, in order to ensure and maintain its competitive edge. In addition, the Group works to secure licensing rights from third parties where necessary in product development and production. However, inadequate execution of these processes could have an impact on the Group’s business results and financial position.

Financial Review


azbil report 2012 6564 azbil report 2012 azbil report 2012 65

Thousands of Millions of yen U.S. dollars (Note 1) ASSETS

CURRENT ASSETS:

Cash and cash equivalents (Notes 3, 6 and 14)

Notes and accounts receivable:

Trade (Note 14)

Other

Allowance for doubtful receivables

Inventories (Note 4)

Deferred tax assets (Note 10)

Prepaid expenses and other current assets

Total current assets

PROPERTY, PLANT AND EQUIPMENT:

Land (Note 5)

Buildings and structures (Note 6)

Machinery and equipment (Note 5)

Furniture and fixtures (Note 5)

Construction in progress

Total

Accumulated depreciation

Net property, plant and equipment

INVESTMENTS AND OTHER ASSETS:

Investment securities (Notes 3 and 14)

Investments in unconsolidated

subsidiaries and associated companies

Goodwill

Deposits (Note 2.u)

Deferred tax assets (Note 10)

Other assets (Note 5)

Total investments and other assets

TOTAL

See notes to consolidated financial statements.

2012

$ 675,072

1,043,248

18,037

(3,598)

196,764

63,718

116,352

2,109,593

76,743

464,589

213,416

232,528

1,848

989,124

(694,658)

294,466

153,324

7,975

31,762

33,217

19,977

75,004

321,259

$2,725,318

2012

¥ 55,356

85,546

1,479

(295)

16,135

5,225

9,541

172,987

6,293

38,096

17,500

19,067

152

81,108

(56,962) 24,146

12,573

654

2,604

2,724

1,638

6,150

26,343

¥223,476

2011

¥ 59,844

76,050

839

(358)

13,785

5,487

8,739

164,386

6,334

38,135

17,258

19,278

351

81,356

(55,645)

25,711

12,202

517

3,879

2,732

1,585

6,489

27,404

¥217,501

Consolidated Balance Sheet

Azbil Corporation (Formerly, Yamatake Corporation) and Consolidated SubsidiariesMarch 31, 2012 and 2011



Finan

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Thousands of Millions of yen U.S. dollars (Note 1) LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Short-term borrowings (Notes 6 and 14) Current portion of long-term debt (Notes 6 and 14) Notes and accounts payable: Trade (Note 14) Other Income taxes payable Accrued bonuses Other accrued expenses and current liabilities Total current liabilities

LONG-TERM LIABILITIES:

Long-term debt (Notes 6 and 14) Liabilities for retirement benefits (Note 7) Deferred tax liabilities (Note 10) Other long-term liabilities Total long-term liabilities

COMMITMENTS AND CONTINGENT LIABILITIES (Notes 13, 15 and 16)

EQUITY (Notes 8, 9 and 18): Common stock–authorized, 279,710,000 shares; issued, 75,116,101 shares Capital surplus Stock acquisition rights Retained earnings Treasury stock—at cost, 1,261,480 shares in 2012 and 1,261,417 shares in 2011 Accumulated other comprehensive income: Unrealized gain on available-for-sale securities Deferred loss on derivatives under hedge accounting Foreign currency translation adjustments Total Minority interests Total equity TOTAL

2012

$ 49,702

18,809

453,480

15,230

62,253

100,159

145,371

845,004

58,155

153,438

10,637

10,809

233,039

128,326

209,729

28

1,311,442

(32,232)

29,898

(11)

(18,315)

1,628,865

18,410

1,647,275

$2,725,318

2012

¥ 4,076

1,542

37,185

1,249

5,105

8,213

11,920

69,290

4,769

12,582

872

886

19,109

10,523

17,198

2

107,538

(2,643)

2,452

(1)

(1,502)

133,567

1,510

135,077

¥223,476

2011 ¥ 4,055 1,699

33,946 941 5,810 8,119 10,923 65,493

6,284 12,582 963 817 20,646

10,523 17,198 2 103,678 (2,643) 2,119 (1) (1,269) 129,607 1,755 131,362 ¥217,501



Thousands of Millions of yen U.S. dollars (Note 1)

NET SALES

COST OF SALES (Notes 7 and 13)

Gross profit

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Notes 7, 12 and 13)

Operating income

OTHER INCOME (EXPENSES): Interest income Dividend income Interest expense Foreign currency exchange loss Gain (loss) on sales of property, plant and equipment–net Gain on sales of investment securities–net (Note 3) Loss on impairment of long-lived assets (Note 5) Others–net (Note 11)

Other income (expenses)–net

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

INCOME TAXES (Note 10):

Current

Deferred

Total income taxes

NET INCOME BEFORE MINORITY INTERESTS

MINORITY INTERESTS IN NET INCOME

NET INCOME

2012

$2,725,602

1,739,745

985,857

810,876

174,981

1,334 3,374 (1,296) (469) 164 23 (2,171) 4,634

5,593

180,574

68,300

4,667

72,967

107,607

(3,720)

$ 103,887

2012

¥223,499

142,659

80,840

66,492

14,348

109 277 (106) (38) 13 2 (178) 380

459

14,807

5,601

382

5,983

8,824

(305)

¥ 8,519

2011

¥219,216

139,502

79,714

64,818

14,896

107 470 (159) (473) (58) 176 (245) (988)

(1,170)

13,726

6,077

(560)

5,517

8,209

(281)

¥ 7,928

Consolidated Statement of Income

Yen U.S. dollars

PER SHARE OF COMMON STOCK (Note 2.s):

Net income Cash dividends applicable to the year


2012

$1.41 0.77

2012

¥115.35 63.00

2011

¥107.35 63.00


NET INCOME BEFORE MINORITY INTERESTS

OTHER COMPREHENSIVE INCOME (LOSS) (Note 17):

Unrealized gain (loss) on available-for-sale securities Deferred loss on derivatives under hedge accounting Foreign currency translation adjustments

Total other comprehensive income (loss)

COMPREHENSIVE INCOME

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:

Azbil Corporation Minority interests


2012

$107,607

3,937 (1) (2,904)

1,032

$108,639

$105,099 3,540

2011

¥ 8,209

(1,023) (2) (422)

(1,447)

¥ 6,762

¥ 6,550 212

2012

¥8,824

323

(238)

85

¥8,909

¥8,618 291

Consolidated Statement of Comprehensive Income

Consolidated Statement of Income and Consolidated Statement of Comprehensive Income Azbil Corporation (Formerly, Yamatake Corporation)

and Consolidated SubsidiariesYears Ended March 31, 2012 and 2011


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Consolidated Statement of Changes in Equity

Consolidated Statement of Changes in Equity

Azbil Corporation (Formerly, Yamatake Corporation) and Consolidated Subsidiaries

Years Ended March 31, 2012 and 2011

Thousands of U.S. dollars (Note 1)Accumulated Other

Comprehensive Income (Loss)

Common Stock

Capital Surplus

Stock Acquisition

RightsRetained Earnings

Treasury Stock

Unrealized Gain (Loss)

on Available-for-Sale

Securities

Deferred Gain (Loss) on

Derivatives under Hedge Accounting

Foreign Currency

Translation Adjustments Total

Minority Interests

Total Equity

BALANCE, MARCH 31, 2011 $128,326 $209,729 $28 $1,264,360 $(32,232) $25,846 $ (10) $ (15,476) $1,580,571 $21,400 $1,601,971

Adjustment of retained earnings for newly consolidated subsidiaries

(62) (62) (62)

Net income 103,887 103,887 103,887

Cash dividends, $0.77 per share (56,742) (56,742) (56,742)

Purchase of treasury stock (8) (8) (8)

Disposal of treasury stock (1) 8 7 7

Transfer from retained earnings to capital surplus 1 (1)

Net change in the year 4,052 (1) (2,839) 1,212 (2,990) (1,778)

BALANCE, MARCH 31, 2012 $128,326 $209,729 $28 $1,311,442 $(32,232) $29,898 $ (11) $ (18,315) $1,628,865 $18,410 $1,647,275


Thousands Millions of yen

Accumulated Other Comprehensive Income (Loss)

Number of Shares of Common

Stock Outstanding

Common Stock

Capital Surplus

Stock Acquisition

RightsRetained Earnings

Treasury Stock

Unrealized Gain (Loss)

on Available-for-Sale

Securities

Deferred Gain (Loss) on

Derivatives under Hedge Accounting

Foreign Currency

Translation Adjustments Total

Minority Interests

Total Equity

BALANCE, APRIL 1, 2010 73,855 ¥10,523 ¥17,198 ¥2 ¥100,363 ¥(2,643) ¥3,149 ¥ 2 ¥ (923) ¥ 127,671 ¥1,607 ¥129,278


3 3 3

Net income 7,928 7,928 7,928

Cash dividends, ¥63 per share (4,616) (4,616) (4,616)

Purchase of treasury stock

Disposal of treasury stock

Net change in the year (1,030) (3) (346) (1,379) 148 (1,231)

BALANCE, MARCH 31, 2011 73,855 10,523 17,198 2 103,678 (2,643) 2,119 (1) (1,269) 129,607 1,755 131,362


(5) (5) (5)

Net income 8,519 8,519 8,519

Cash dividends, ¥63 per share (4,654) (4,654) (4,654)

Purchase of treasury stock (1) (1) (1)

Disposal of treasury stock 1 1 1

Transfer from retained earnings to capital surplus

Net change in the year 333 (233) 100 (245) (145)

BALANCE, MARCH 31, 2012 73,855 ¥10,523 ¥17,198 ¥2 ¥107,538 ¥(2,643) ¥2,452 ¥(1) ¥(1,502) ¥133,567 ¥1,510 ¥135,077



OPERATING ACTIVITIES: Income before income taxes and minority interests Adjustments for: Income taxes–paid Depreciation and amortization (Reversal of) provision for doubtful receivables Increase in accrued bonuses (Gain) loss on sales of property, plant and equipment–net Gain on sales of investment securities–net Loss on impairment of long-lived assets-trade Increase in notes and accounts receivable (Increase) decrease in inventories Increase (decrease) in notes and accounts payable Increase (decrease) in liabilities for retirement benefits Others–net Total adjustments Net cash provided by operating activities INVESTING ACTIVITIES: Proceeds from sales of property, plant and equipment Purchases of property, plant and equipment Purchase of intangible assets Proceeds from sales of investment securities Purchases of investment securities Proceeds from sales of beneficiary securities of trust Purchases of beneficiary securities of trust Others–net Net cash used in investing activities FINANCING ACTIVITIES: Net (decrease) increase in short-term borrowings Proceeds from long-term debt Repayment of long-term debt Disposal of treasury stock Purchase of treasury stock Dividends paid Others–net Net cash used in financing activities FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEARSee notes to consolidated financial statements.

2012 $ 180,574

(76,856) 64,649 (372) 1,194 (164) (23) 2,171 (116,762) (29,462) 40,666 23 3,069 (111,867) 68,707

1,831 (28,989) (4,141) 65 (4,227) 176,440 (176,157) (8,105) (43,283)

181

(19,387) 7 (8) (56,675) (2,082) (77,964)

(2,189) (54,729) 729,801 $ 675,072

2012 ¥ 14,807

(6,302) 5,301 (31) 98 (13) (2) 178 (9,574) (2,416) 3,335 2 251 (9,173) 5,634

150 (2,377) (340) 5 (347) 14,468 (14,445) (663) (3,549)

15

(1,590) 1 (1) (4,647) (171) (6,393)

(180) (4,488) 59,844 ¥ 55,356

2011 ¥ 13,726 (3,866) 5,789 8 213 58 (176) 245 (1,610) 2,500 (906) (532) (226) 1,497 15,223 176 (2,532) (675) 1,262 (83) 13,793 (14,082) (135) (2,276) (8,409) 7,050 (1,893) (1) (4,613) (135) (8,001) (466) 4,480 55,364 ¥ 59,844

Consolidated Statement of Cash Flows

Azbil Corporation (Formerly, Yamatake Corporation) and Consolidated SubsidiariesYears Ended March 31, 2012 and 2011


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Financial Statements

1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards.

In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2011 consolidated financial statements to conform to the classifications used in 2012.

The consolidated financial statements are stated in Japanese yen, the currency of the country in which Azbil Corporation (“Azbil”) is incorporated and operates. The translation of Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan and has been made at the rate of ¥82 to $1, the approximate rate of exchange as of March 31, 2012. Such translation should not be construed as representation that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Consolidation–The consolidated financial statements as of March 31, 2012 include the accounts of Azbil and its 35 significant (35 in 2011) subsidiaries (collectively, the “azbil Group”).

Under the control or influence concept, those companies in which Azbil, directly or indirectly, is able to exercise control over operations are fully consolidated.

Investments in unconsolidated subsidiaries and associated companies are stated at cost. If the equity method of accounting had been applied to the investments in these companies, the effect on the accompanying consolidated financial statements would not be material.

Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets of the acquired subsidiary and associated company at the date of acquisition. Goodwill from the acquisition of Azbil Kimmon Co., Ltd. (“Azbil Kimmon”) is being amortized over 7 years. Other goodwill is being amortized on a straight-line basis over 5 years, with the exception of minor amounts which are charged to income in the period of the acquisitions.

All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the azbil Group is eliminated.

b. Cash Equivalents–Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value.

Cash equivalents include time deposits, certificates of deposit, beneficiary securities of trust under resale agreements and commercial paper, all of which mature or become due within three months of the date of acquisition.

c. Inventories–Inventories, other than raw materials, are principally stated at the lower of cost on a specific identification basis or net selling value. Raw materials are principally stated at the lower of cost determined by the moving-average method or net selling value.

d. Allowance for Doubtful Receivables–The allowance for doubtful receivables is stated in amounts considered to be appropriate based on the azbil Group’s past credit loss experience and an evaluation of potential losses in the receivables outstanding.

e. Marketable and Investment Securities–Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows: (1) trading securities, which are held for the purpose of earning capital gains in the near term are reported at fair value, and the related unrealized gains and losses are included in earnings; (2) held-to-maturity debt securities, for which there is the positive intent and ability to hold to maturity are reported at amortized cost; and (3) available-for-sale securities, which are not classified as either of the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity.

Non-marketable available-for-sale securities are stated at cost determined by the moving-average method. For other-than-temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income.

f. Property, Plant and Equipment–Property, plant and equipment are stated at cost. Depreciation for Azbil and its consolidated domestic subsidiaries is computed by the declining-balance method, while the straight-line method is applied to buildings acquired after April 1, 1998. Depreciation of consolidated foreign subsidiaries is mainly computed by the straight-line method. Equipment held for lease is depreciated by the straight-line method over the respective lease periods.

The range of useful lives is from 15 to 50 years for buildings and structures, from 4 to 9 years for machinery and equipment, and from 2 to 6 years for furniture and fixtures.

g. Long-Lived Assets–The azbil Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and the eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and the eventual disposition of the asset or the net selling price at disposition.

h. Retirement and Pension Plans–Azbil has a non-contributory funded pension plan and a defined contribution pension plan covering substantially all of its employees.

Most of the consolidated subsidiaries have non-contributory funded pension plans and unfunded retirement benefit plans.

Notes to Consolidated Financial Statements

Azbil Corporation (Formerly, Yamatake Corporation) and Consolidated Subsidiaries

Years Ended March 31, 2012 and 2011


The liability for employees’ retirement benefits is provided at the amount based on the projected benefit obligation and plan assets at the balance sheet date.

Retirement benefits to directors and corporate auditors are provided at the amount which would be required if all directors and corporate auditors retired at each balance sheet date.

i. Asset Retirement Obligations–In March 2008, the Accounting Standards Board of Japan (the “ASBJ”) published ASBJ Statement No. 18, “Accounting Standard for Asset Retirement Obligations,” and ASBJ Guidance No. 21, “Guidance on Accounting Standard for Asset Retirement Obligations.” Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from the acquisition, construction, development and the normal operation of a tangible fixed asset and is associated with the retirement of such tangible fixed asset. The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of the asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows are reflected as an increase or a decrease in the carrying amount of the liability and the capitalized amount of the related asset retirement cost.

j. Stock Options–In December 2005, the ASBJ issued ASBJ Statement No. 8, “Accounting Standard for Stock Options,” and related guidance. The new standard and guidance are applicable to stock options newly granted on and after May 1, 2006. This standard requires companies to recognize compensation expense for employee stock options based on the fair value at the date of grant and over the vesting period as consideration for receiving goods or services. The standard also requires companies to account for stock options granted to non-employees based on the fair value of either the stock option or the goods or services received. In the balance sheet, the stock option is presented as a stock acquisition right as a separate component of equity until exercised. The standard covers equity-settled, share-based payment transactions, but does not cover cash-settled, share-based payment transactions. In addition, the standard allows unlisted companies to measure options at their intrinsic value if they cannot reliably estimate fair value.

k. Research and Development Costs–Research and development costs are charged to income as incurred.

l. Leases–In March 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard for Lease Transactions,” which revised the

previous accounting standard for lease transactions issued in June 1993. The revised accounting standard for lease transactions was effective for fiscal years beginning on or after April 1, 2008.

Under the previous accounting standard, finance leases that were deemed to transfer ownership of the leased property to the lessee were capitalized. However, other finance leases were permitted to be accounted for as operating lease transactions if certain “as if capitalized” information was disclosed in the note to the lessee’s financial statements. The revised accounting standard requires that all finance lease transactions be capitalized by recognizing lease assets and lease obligations in the balance sheet. In addition, the revised accounting standard permits leases which existed at the transition date and which do not transfer ownership of the leased property to the lessee to be accounted for as operating lease transactions with certain “as if capitalized” information disclosed in the notes to the lessee’s financial statements.

Azbil and its consolidated domestic subsidiaries applied the revised accounting standard effective April 1, 2008. In addition, Azbil and its consolidated domestic subsidiaries continue to account for leases which existed at the transition date and which do not transfer ownership of the leased property to the lessee as operating lease transactions.

All other leases are accounted for as operating leases.

m. Bonuses to Directors–Bonuses to directors are accrued at the year-end to which such bonuses are attributable. The balance of such accrued bonuses as of March 31, 2012 and 2011 was ¥115 million ($1,408 thousand) and ¥103 million, respectively.

n. Construction Contracts–In December 2007, the ASBJ issued ASBJ Statement No. 15, “Accounting Standard for Construction Contracts,” and ASBJ Guidance No. 18, “Guidance on Accounting Standard for Construction Contracts.” Under this accounting standard, construction revenue and construction costs should be recognized by the percentage-of-completion method, if the outcome of a construction contract can be estimated reliably. When total construction revenue, total construction costs, and the stage of completion of the contract at the balance sheet date can be reliably measured, the outcome of a construction contract can be estimated reliably. If the outcome of a construction contract cannot be reliably estimated, the completed-contract method should be applied. When it is probable that total construction costs will exceed total construction revenue, an estimated loss on the contract should be immediately recognized by providing for a loss on construction contracts.

o. Income Taxes–The provision for income taxes is computed based on the pretax income included in the consolidated statement of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences and tax loss carryforwards.

p. Foreign Currency Transactions–All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance


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sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated statement of income to the extent that they are not hedged by forward exchange contracts.

q. Foreign Currency Financial Statements–The balance sheet accounts of consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date except for equity, which is translated at the historical rate. Differences arising from such translation are shown as “Foreign currency translation adjustments” under accumulated other comprehensive income (loss) in a separate component of equity. Revenue and expense accounts of consolidated foreign subsidiaries are translated into yen at the average exchange rate.

r. Derivatives Financial Instruments–The azbil Group uses derivative financial instruments to manage its exposures to fluctuations in foreign exchange. Foreign exchange forward contracts are utilized by the azbil Group to reduce foreign currency exchange risks. The azbil Group does not enter into derivatives for trading or speculative purposes.

All derivatives are recognized as either assets or liabilities and measured at fair value with gains or losses on derivative transactions recognized in the consolidated statement of income. If derivatives qualify for hedge accounting because of high correlation and effectiveness between the hedging instruments and the hedged items, hedge accounting is applied.

Foreign exchange forward contracts are utilized to hedge foreign exchange exposures for export sales and import purchases. Trade receivables and payables denominated in foreign currencies are translated at the contracted rates if the forward contracts qualify for hedge accounting. Forward contracts related to forecasted (or committed) transactions are measured at fair value, but the unrealized gains/losses are deferred until the underlying transactions are completed.

s. Per Share Information–Net income per share is computed by dividing net income available to shareholders of common stock by the weighted-average number of common shares outstanding for the period, retroactively adjusted for stock splits. The weighted-average number of shares of common stock used in the computation was 73,854,722 shares for 2012 and 73,854,684 shares for 2011.

Cash dividends per share presented in the accompanying consolidated statement of income are dividends applicable to the respective years, including dividends to be paid after the end of the year.

Diluted net income per share is not disclosed because it is anti-dilutive.

t. Accounting Changes and Error Corrections–In December 2009, the ASBJ issued ASBJ Statement No. 24, “Accounting Standard for Accounting Changes and Error Corrections,” and ASBJ Guidance No. 24, “Guidance on Accounting Standard for Accounting Changes and Error Corrections.” Accounting treatments under this standard and guidance are as follows:(1) Changes in accounting policies When a new accounting policy is applied with revision of

accounting standards, the new policy is applied retrospectively unless the revised accounting standards include specific transitional provisions. When the revised accounting standards include specific transitional provisions, an entity shall comply with the specific transitional provisions.

(2) Changes in presentations When the presentation of financial statements is changed, prior-

period financial statements are reclassified in accordance with the new presentation.

(3) Changes in accounting estimates A change in an accounting estimate is accounted for in the period

of the change if the change affects that period only, and is accounted for prospectively if the change affects both the period of the change and future periods.

(4) Corrections of prior-period errors When an error in prior-period financial statements is discovered,

those statements are restated.

This accounting standard and the guidance are applicable to accounting changes and corrections of prior-period errors which are made from the beginning of the fiscal year that begins on or after April 1, 2011.

u. Presentation Changes (Reclassifications) Deposits–Prior to April 1, 2012, deposits were included in the other assets among the investments and other assets section of the consolidated balance sheet. Since during this fiscal year ended March 31, 2012, the amount of ¥2,724 million ($33,217 thousand) became to have significance in the investments and other assets section due to total amount of the investments and other assets section decreasing. As such, deposits are disclosed separately in the investments and other assets section of the consolidated balance sheet as of March 31, 2012. The amount included in the other assets as of March 31, 2011 was ¥2,732 million.

v. New Accounting Pronouncements Accounting Standard for Retirement Benefits–On May 17, 2012, the ASBJ issued ASBJ Statement No. 26, “Accounting Standard for Retirement Benefits” and ASBJ Guidance No. 25, “Guidance on Accounting Standard for Retirement Benefits,” which replaced the Accounting Standard for Retirement Benefits that had been issued by the Business Accounting Council in 1998 with effective date of April 1, 2000 and the other related practical guidances, being followed by partial amendments from time to time through 2009.

Major changes are as follows:(a) Treatment in the balance sheet Under the current requirements, actuarial gains and losses and past

service costs that are yet to be recognized in profit or loss are not recognized in the balance sheet, and the difference between retirement benefit obligations and plan assets (hereinafter, “deficit or surplus”), adjusted by such unrecognized amounts, are recognized as a liability or asset. Under the revised accounting standard, actuarial gains and losses and past service costs that are yet to be recognized in profit or loss shall be recognized within equity (accumulated other comprehensive income), after adjusting for tax effects, and the deficit or surplus shall be recognized as a liability (liability for retirement benefits) or asset (asset for retirement benefits).

(b) Treatment in the statement of income and the statement of comprehensive income (or the statement of income and comprehensive income) The revised accounting standard would not change how to



4. INVENTORIESInventories at March 31, 2012 and 2011, consisted of the following:

Millions of yen Thousands of U.S. dollars

2012 2011 2012Merchandise ¥ 1,775 ¥ 1,370 $ 21,646 Finished products 2,352 2,327 28,681Work in process 5,526 4,745 67,384Raw materials 6,482 5,343 79,053Total ¥16,135 ¥13,785 $196,764

5. LONG-LIVED ASSETSThe azbil Group reviewed its long-lived assets for impairment as of

March 31, 2012 and 2011, and recognized an impairment loss of ¥178 million ($2,171 thousand) and ¥245 million for certain assets of Azbil Kimmon and an idle asset of the former Futaba Plant (Futaba County, Fukushima Prefecture) within the Fukushima nuclear disasters evacuation zone (surrounding Tokyo Electric Power Company’s Fukushima Nos. 1 and 2 nuclear plants), respectively.

The carrying amount of the relevant property, plant and the idle asset and equipment was written down to the net selling price. However, as the net selling price of the idle asset cannot be quoted reasonably, the net selling price is based on the memorandum value.

3. MARKETABLE AND INVESTMENT SECURITIES Marketable and investment securities as of March 31, 2012 and 2011, consisted of the following:

Thousands of Millions of yen U.S. dollars Current—Other

Total

Non-current:

Equity securities

Other

Total

The costs and aggregate fair values of marketable and investment securities whose fair value is readily determinable as of March 31, 2012

and 2011, were as follows:

Millions of yen Thousands of U.S. dollars2012 2011 2012

CostUnrealized

GainsUnrealized

LossesFair

Value CostUnrealized

GainsUnrealized

LossesFair

Value CostUnrealized

GainsUnrealized

LossesFair

ValueSecurities classified as available-for-sale: Equity securities ¥ 5,844 ¥6,020 ¥131 ¥11,733 ¥ 5,708 ¥5,944 ¥103 ¥11,549 $ 71,273 $73,402 $1,593 $143,082 Other 12,459 1 4 12,456 12,958 3 4 12,957 151,945 11 50 151,906

The information for available-for-sale securities whose fair values are not readily determinable as of March 31, 2012 and 2011, is disclosed in

Note 14.

The information for available-for-sale securities which were sold during the years ended March 31, 2012 and 2011 was as follows:

Millions of yen Thousands of U.S. dollars2012 2011 2012

Proceeds Realized Gains

Realized Losses Proceeds Realized

GainsRealized Losses Proceeds Realized

GainsRealized Losses

Available-for-sale—Equity securities ¥5 ¥2 ¥1,796 ¥194 ¥18 $65 $25 $2

The impairment losses on available-for-sale equity securities for the years ended March 31, 2012 and 2011 were ¥28 million ($341 thousand)

and ¥71 million, respectively.

2012 $151,220

$151,220

$152,635

689

$153,324

2011 ¥12,900

¥12,900

¥12,128

74

¥12,202

2012 ¥12,400

¥12,400

¥12,516

57

¥12,573

recognize actuarial gains and losses and past service costs in profit or loss. Those amounts would be recognized in profit or loss over a certain period no longer than the expected average remaining working lives of the employees. However, actuarial gains and losses and past service costs that arose in the current period and yet to be recognized in profit or loss shall be included in other comprehensive income and actuarial gains and losses and past service costs that were recognized in other comprehensive income in prior periods and then recognized in profit or loss in the current period shall be treated as reclassification adjustments. This accounting standard and the guidance are effective for the

end of annual periods beginning on or after April 1, 2013 with earlier application being permitted from the beginning of annual periods beginning on or after April 1, 2013. However, no retrospective application of this accounting standard to consolidated financial statements in prior periods is required.

Azbil expects to apply the revised accounting standard from the beginning of the annual period beginning on April 1, 2013 and is in the process of measuring the effects of applying the revised accounting standard for the year ending March 31, 2014.


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6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT

Short-term borrowings as of March 31, 2012 and 2011, mainly consisted of notes to banks and bank overdrafts. The annual interest rates applicable to the short-term bank loans ranged from 0.5% to 6.1% as of March 31, 2012 and from 0.5% to 3.8% as of March 31, 2011.

Long-term debt as of March 31, 2012 and 2011, consisted of the following:


2012 2011 2012Loans from banks and other

financial institutions, due serially through 2026 with interest rates ranging from 0.8% to 2.0% in 2012 and from 0.9% to 2.1% in 2011: Collateralized ¥ 22 ¥ 82 $ 272 Unsecured 6,132 7,650 74,781

Bonds due serially through 2012 with interest rates ranging from 0.6% to 1.5% in 2011:

Collateralized 50 Unsecured 10

Obligations under finance leases 157 191 1,911Total 6,311 7,983 76,964

Less current portion (1,542) (1,699) (18,809)Long-term debt, less current

portion ¥ 4,769 ¥ 6,284 $ 58,155

As of March 31, 2012, Azbil had an unused line of credit amounting to ¥30,000 million ($365,853 thousand), of which ¥10,000 million ($121,951 thousand) related to the unused portion of commitment lines with four banks and ¥20,000 million ($243,902 thousand) related to a medium-term notes program.

Annual maturities of long-term debt as of March 31, 2012, for the next five years and thereafter were as follows:

Year Ending March 31 Millions of yen Thousands of U.S. dollars

2013 ¥1,542 $18,809 2014 1,533 18,6902015 1,742 21,2462016 1,431 17,4542017 25 3092018 and thereafter 38 456Total ¥6,311 $76,964

The carrying amounts of assets pledged as collateral for the above collateralized debt at March 31, 2012, which include the amount for short-term debt of ¥50 million were as follows:


Time deposit ¥ 55 $ 671 Buildings and structures 148 1,808Total ¥203 $2,479

As is customary in Japan, the azbil Group maintains deposit balances with banks with which it has bank loans. Such deposit balances are not legally or contractually restricted as to withdrawal.

General agreements with respective banks provide, as is customary in Japan, that additional collateral must be provided under certain circumstances if requested by the lending banks and that certain banks have the right to offset cash deposited with them against any bank loan or obligation that becomes due and, in case of default and certain other specified events, against all other debt payable to the banks. The azbil Group has never received any such requests.

7. RETIREMENT AND PENSION PLANSAzbil and certain subsidiaries have retirement and pension plans for

employees, and certain domestic subsidiaries have retirement benefit plans for directors and corporate auditors.

Under most circumstances, employees terminating their employment are entitled to retirement benefits determined based on the rate of pay at the time of termination, years of service, and certain other factors. Such retirement benefits are made in the form of lump-sum severance payments from the azbil Group and annuity payments from a trustee. Employees are entitled to larger payments if the termination is involuntary, by retirement at the mandatory retirement age or by death, than in the case of voluntary termination at certain specific ages prior to the mandatory retirement age.

The liability for retirement benefits at March 31, 2012 and 2011, for directors and corporate auditors is ¥189 million ($2,306 thousand) and ¥227 million, respectively. The retirement benefits for directors and corporate auditors are paid subject to the approval of the shareholders.

The liability for employees’ retirement benefits at March 31, 2012 and 2011, consisted of the following:


2012 2011 2012Projected benefit obligation ¥ 42,379 ¥ 42,843 $ 516,816 Fair value of plan assets (26,349) (24,788) (321,324)Unrecognized prior service

costs 1,935 2,156 23,603Unrecognized actuarial loss (5,573) (7,872) (67,969)Prepaid pension expense 1 16 6Net liability ¥ 12,393 ¥ 12,355 $ 151,132

The components of net periodic benefit costs for the years ended March 31, 2012 and 2011, are as follows:


2012 2011 2012Service cost ¥1,821 ¥1,799 $22,201 Interest cost 824 820 10,052Expected return on plan assets (478)Amortization of prior service costs (220) (220) (2,688)Recognized actuarial loss 1,014 980 12,366Payment for defined contribution pension plan and other 843 828 10,283Net periodic benefit costs ¥4,282 ¥3,729 $52,214

Assumptions used for the years ended March 31, 2012 and 2011, are set forth as follows:

2012 2011Discount rate 2.0% 2.0%Expected rate of return on plan assets 0.0% 2.0%Amortization period of prior service cost 10–15 years 10–15 yearsRecognition period of actuarial gain/loss 10–15 years 10–15 years

8. EQUITYJapanese companies are subject to the Companies Act of Japan

(the “Companies Act”). The significant provisions in the Companies Act that affect financial and accounting matters are summarized below:



a. Dividends Under the Companies Act, companies can pay dividends at any

time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders meeting. For companies that meet certain criteria such as (1) having a Board of Directors, (2) having independent auditors, (3) having a Board of Corporate Auditors, and (4) the term of service of the directors is prescribed as one year rather than two years of normal term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends-in-kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. However, Azbil cannot do so because it does not meet all the above criteria. The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject to a certain limitation and additional requirements. Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.

b. Increases/Decreases and Transfer of Common Stock, Reserve and Surplus

The Companies Act requires that an amount equal to 10% of dividends be appropriated as a legal reserve (a component of

retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total aggregate amount of legal reserve and additional paid-in capital equals 25% of the amount of common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.

c. Treasury Stock and Treasury Stock Acquisition Rights The Companies Act also provides for companies to purchase

treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by specific formula. Under the Companies Act, stock acquisition rights are presented as a separate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.

The stock options outstanding as of March 31, 2012, are as follows:

Stock Option Persons Granted Number of Options Granted Date of Grant Exercise Price

(U.S. dollars) Exercise Period

2007 Stock Option 1 employee 6,000 shares 2007.1.23 $1.00 From January 23, 2007 to January 23, 2017

2007 Stock Option 2 employees 10,450 shares 2007.1.24 1.00 From January 24, 2007 to January 24, 2017

2007 Stock Option 5 employees 34,500 shares 2007.5.4 1.00 From May 4, 2007 to May 4, 2017

2007 Stock Option 2 employees 24,000 shares 2007.8.13 1.00 From August 13, 2007 to August 13, 2017

2007 Stock Option 1 director 20,000 shares 2007.11.20 1.00 From November 20, 2007 to November 20, 2017

2008 Stock Option 1 director 10,000 shares 2008.4.25 0.38 From April 25, 2008 to April 25, 2018

2008 Stock Option 1 director and 9 employees 70,000 shares 2008.6.13 0.38 From June 13, 2008 to June 13, 2018

2008 Stock Option 3 employees 19,000 shares 2008.8.19 0.38 From August 19, 2008 to August 19, 2018

2009 Stock Option 1 director and 8 employees 14,000 shares 2009.6.22 1.46 From June 22, 2010 to June 22, 2019

2009 Stock Option 4 employees 11,000 shares 2009.9.30 1.46 From September 30, 2009 to May 7, 2012

9. STOCK OPTIONS A director and employees of BioVigilant Systems, Inc. were granted options for new common stock.


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10. INCOME TAXESAzbil and its domestic subsidiaries are subject to Japanese national

and local income taxes which, in the aggregate, resulted in statutory tax rate of approximately 40.4% for the years ended March 31, 2012 and 2011.

The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities at March 31, 2012 and 2011, are as follows:


2012 2011 2012Deferred tax assets:

Pension and severance costs ¥ 4,464 ¥ 4,782 $ 54,435

Accrued expenses 4,056 4,278 49,460Depreciation 1,071 1,143 13,056Loss on impairment of

property, plant and equipment 308 306 3,751Allowance for doubtful

receivables 838 642 10,216Tax loss carryforwards 1,624 2,923 19,806Others 2,491 2,610 30,402Less valuation allowance (5,036) (6,155) (61,416)

Total 9,816 10,529 119,710Deferred tax liabilities:

Net unrealized gain on available-for-sale securities 2,063 2,327 25,155

Special advanced depreciation 1,434 1,711 17,482

Others 328 382 4,015Total 3,825 4,420 46,652Net deferred tax assets ¥ 5,991 ¥ 6,109 $ 73,058

On December 2, 2011, new tax reform laws were enacted in Japan, which changed the statutory tax rate from approximately 40.4% to 37.9% effective for the fiscal years beginning on or after April 1, 2012 through March 31, 2015, and to 35.5% afterwards. The effect of this change was to decrease deferred taxes in the consolidated balance sheet as of March 31, 2012, by ¥169 million ($2,062 thousand), to increase income taxes—deferred in the consolidated statement of income for the year then ended by ¥457 million ($5,577 thousand) and to increase unrealized gain on available-for-sale securities in the consolidated balance sheet as of March 31, 2012, by ¥288 million ($3,516 thousand).

At March 31, 2012, certain subsidiaries have tax loss carryforwards aggregating approximately ¥8,307 million ($101,301 thousand) which are available to be offset against taxable income of such subsidiaries in future years. These tax loss carryforwards, if not utilized, will expire as follows:

Year Ending March 31 Millions of yen Thousands of U.S. dollars

2013 ¥ 35 $ 431 2014 3,183 38,8182015 673 8,2022016 410 4,9962017 3 382018 and thereafter 4,003 48,816Total ¥8,307 $101,301


The stock option activity is as follows:

Year Ended March 31, 2011 2003 Stock Option

2004 Stock Option

2005 Stock Option

2007 Stock Option

2008 Stock Option

2009 Stock Option

(Shares)Non-vestedApril 1, 2010—Outstanding 36,498 93,668 20,000

GrantedCanceled (2,000)Vested (36,498) (46,834) (6,001)

March 31, 2011—Outstanding 46,834 11,999VestedApril 1, 2010—Outstanding 3,000 6,000 10,000 175,452 46,832 11,000

Vested 36,498 46,834 6,001ExercisedCanceled (60,000)

March 31, 2011—Outstanding 3,000 6,000 10,000 151,950 93,666 17,001

Year Ended March 31, 2012Non-vestedMarch 31, 2011—Outstanding 46,834 11,999

GrantedCanceled (13,834) (2,666)Vested (33,000) (4,671)

March 31, 2012—Outstanding 4,662VestedMarch 31, 2011—Outstanding 3,000 6,000 10,000 151,950 93,666 17,001

Vested 33,000 4,671ExercisedCanceled (3,000) (6,000) (10,000) (57,000) (27,666) (1,334)

March 31, 2012—Outstanding 94,950 99,000 20,338Exercise price (U.S. dollars) $1.00 $0.38 $1.46 Average stock price exercise (U.S. dollars)Fair value price at grant date (U.S. dollars)


11. OTHER INCOME (EXPENSES)—NETOther income (expenses)—net for the years ended March 31, 2012 and 2011, mainly consisted of the following:


2012 2011 2012Gain on compensation from Tokyo Electric Power Company caused by claim for damage of Fukushima nuclear disasters ¥ 318 $ 3,877 Loss on disaster caused by the Great East Japan Earthquake:

Equipment restoration costs (108) ¥ (68) (1,320)Charitable donations (53)Production suspensions caused by natural disasters—fixed costs during the suspension period (25) (16) (302)Loss on destruction of inventory (14)Others (81) (985)

Total ¥ 104 ¥(151) $ 1,270

12. RESEARCH AND DEVELOPMENT COSTSResearch and development costs charged to income were ¥8,816 million ($107,515 thousand) and ¥8,953 million for the years ended March 31,

2012 and 2011, respectively.

13. LEASES(1) Financing Leases as a Lessee

The azbil Group leases certain machinery, computer equipment, office space and other assets as a lessee. Total rental expenses under the above leases for the years ended March 31, 2012 and 2011, were ¥5,180 million ($63,176 thousand) and

¥5,401 million, respectively. ASBJ Statement No. 13, “Accounting Standard for Lease Transactions,” requires that all finance lease transactions be capitalized to recognize

lease assets and lease obligations in the balance sheet. However, ASBJ Statement No. 13 permits leases without ownership transfer of the leased property to the lessee and whose lease inception was before March 31, 2008, to continue to be accounted for as operating lease transactions if certain “as if capitalized” information is disclosed in the notes to the financial statements. Azbil and its consolidated domestic subsidiaries applied ASBJ Statement No. 13 effective April 1, 2008, and accounted for such leases as operating lease transactions. Pro forma information of leased property whose lease inception was before March 31, 2008, was as follows:

Millions of yen2012 2011

Machinery and

Equipment

Furniture and Fixtures Software Total

Machinery and

Equipment


Acquisition cost ¥511 ¥220 ¥140 ¥871 ¥621 ¥553 ¥337 ¥1,511Accumulated depreciation 332 212 118 662 386 511 289 1,186Accumulated impairment loss 124 10 134 130 10 140Net leased property ¥ 55 ¥ 8 ¥ 12 ¥ 75 ¥105 ¥ 42 ¥ 38 ¥ 185

Thousands of U.S. dollars2012

Machinery and

Equipment


Acquisition cost $6,227 $2,692 $1,702 $10,621 Accumulated depreciation 4,054 2,583 1,435 8,072Accumulated impairment loss 1,509 120 1,629Net leased property $ 664 $ 109 $ 147 $ 920

Obligations under finance leases:


2012 2011 2012Due within one year ¥ 363 ¥ 483 $ 4,426 Due after one year 1,093 1,456 13,336Total ¥1,456 ¥1,939 $17,762

The above obligations under finance leases include the imputed interest portion.Allowance for impairment loss on leased property of ¥18 million ($220 thousand) as of March 31, 2012, and ¥43 million as of March 31, 2011, is

not included in the obligations under finance leases.


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14. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

(1) Policy for Financial InstrumentsThe azbil Group makes safety the first priority in terms of its asset

management and limits its investments to financial assets that consist mainly of short-term deposits, while the azbil Group’s financing needs are met by selecting the most suitable method of funding while taking into account such factors as the purpose of the loan, the terms and funding costs. The azbil Group limits the use of derivatives to forward exchange contracts and currency option contracts to hedge against the risks associated with fluctuating exchange rates, and interest rate swaps to hedge against the risks associated with fluctuating interest rates, and does not engage in transactions for speculative purposes.

(2) Nature and Extent of Risks Arising from Financial Instruments and Risk Management

Notes and accounts receivable–trade are subject to the credit risks of the customers. The azbil Group manages its credit risks on the basis of internal guidelines, which include keeping track of due dates and outstanding balances of the receivables for each transaction and also monitors the credit standing of the major customers on a yearly basis. Notes and accounts receivable–trade denominated in foreign currencies are subject to risks associated with fluctuating exchange rates; however, their net positions after deducting operating liabilities are, in principle, hedged through the use of forward exchange contracts.

Investment securities mainly comprise stocks of companies with which the azbil Group has business relationships, and are subject to

the risks associated with fluctuating stock prices. Such stock investments are managed by monitoring their fair values and the financial status of the companies on a regular basis, as well as conducting ongoing reviews of their holding status by taking into account the azbil Group’s relationship with the issuing companies.

Notes and accounts payable–trade are liabilities due within one year. Although certain notes and accounts payable–trade denominated in foreign currencies are subject to the risks associated with fluctuating exchange rates, the majority of such instruments are constantly kept within the amount of the outstanding balance of accounts receivable denominated in the same foreign currency.

Interest-bearing debt mainly comprises short-term borrowings. While a portion of these borrowings, having floating interest rates, is subject to the risks associated with fluctuating interest rates, the effects of these risks are negligible as their terms are short and amounts minimal.

Derivative transactions are executed and managed in accordance with internal rules that have determined the authorization procedures of such transactions, are used for the purpose of mitigating credit risks, and are conducted solely with highly rated financial institutions as counterparties. Please see Note 15 for more detail about derivatives.

Additionally, notes and accounts payable–trade and short-term borrowings are subject to liquidity risks such as in the event the azbil Group cannot execute payment on the payment date. Liquidity risks are managed by such methods as having each group company draw up monthly cash flow plans.


Depreciation expense and other information for finance leases:


2012 2011 2012Depreciation expense ¥107 ¥234 $1,299 Lease payments 202 366 2,468Reversal of allowance for impairment loss on leased property 25 32 301

The above depreciation expense, which is not reflected in the accompanying consolidated statement of income, is computed mainly by the declining-balance method at rates based on the period of those financing leases with a remaining value of 10% of total lease payments.

The minimum rental commitments under noncancelable operating leases as of March 31, 2012 and 2011, were as follows:


2012 2011 2012Due within one year ¥495 ¥ 482 $6,041 Due after one year 238 700 2,902Total ¥733 ¥1,182 $8,943

(2) Financing Leases as a LessorThe azbil Group leases certain machinery and equipment as a lessor.Azbil and its consolidated domestic subsidiaries applied ASBJ Statement No. 13 effective April 1, 2008, and accounted for leases which existed at

the transition date and which do not transfer ownership of the leased property to the lessee as operating lease transactions. Pro forma information of such leases existing at the transition date, such as receivables under the finance leases, on an “as if capitalized” basis for the years ended March 31, 2012 and 2011, was as follows:


2012 2011 2012Receivables under finance leases: Due within one year ¥ 271 ¥ 272 $ 3,306 Due after one year 1,079 1,350 13,159Total ¥1,350 ¥1,622 $16,465


(3) Fair Values of Financial InstrumentsFair values of financial instruments are based on quoted price in active markets. If quoted price is not available, other rational valuation techniques

are used instead. Also please see Note 15 for the detail of fair value for derivatives. (a) Fair value of financial instruments

Millions of yen Thousands of U.S. dollarsMarch 31, 2012 March 31, 2011 March 31, 2012

Carrying Amount Fair Value Unrealized

LossCarrying Amount Fair Value Unrealized

LossCarrying Amount Fair Value Unrealized

LossCash and cash equivalents ¥ 55,356 ¥ 55,356 ¥ 59,844 ¥ 59,844 $ 675,072 $ 675,072 Notes and accounts receivable—trade 85,546 85,546 76,050 76,050 1,043,248 1,043,248Investment securities 11,789 11,789 11,605 11,605 143,768 143,768Total ¥152,691 ¥152,691 ¥147,499 ¥147,499 $1,862,088 $1,862,088 Short-term borrowings ¥ 4,076 ¥ 4,076 ¥ 4,055 ¥ 4,055 $ 49,702 $ 49,702 Current portion of long-term debt 1,542 1,542 1,699 1,699 18,809 18,809Notes and accounts payable—trade 37,185 37,185 33,946 33,946 453,480 453,480Long-term debt 4,769 4,777 ¥(8) 6,284 6,302 ¥(18) 58,155 58,250 $(95)Total ¥ 47,572 ¥ 47,580 ¥(8) ¥ 45,984 ¥ 46,002 ¥(18) $ 580,146 $ 580,241 $(95)

Cash and Cash Equivalents, and Notes and Accounts Receivable–Trade The carrying values of cash and cash equivalents and notes and accounts receivable–trade approximate fair value because of their short maturities. Investment Securities The fair values of investment securities are measured at the quoted market price of the stock exchange for equity instruments, and at the quoted price obtained from the financial institution for certain debt instruments. The information of the fair value for investment securities by classification is included in Note 3.Short-Term Borrowings, Current Portion of Long-Term Debt and Notes and Accounts Payable–Trade The carrying values of short-term borrowings, current portion of long-term debt, and notes and accounts payable–trade approximate fair value because of their short maturities.Long-Term Debt The fair values of loans from banks and other financial institutions are determined by the present values calculated by discounting the total amount of principal and interest rates currently considered applicable to similar loans. The fair values of bonds without market value price are determined by the present values calculated by discounting the total amount of principal and interest at a rate that takes into account the remaining term and credit risks.Derivatives The information of the fair value for derivatives is included in Note 15.

(b) Carrying amount of financial instruments whose fair value cannot be reliably determined


2012 2011 2012Investments in equity instruments that do not have a quoted market price in an active market ¥784 ¥597 $9,556

(4) Maturity Analysis for Financial Assets and Securities with Contractual Maturities

Millions of yen Thousands of U.S. dollarsMarch 31, 2012 March 31, 2012

Due in 1 Year or Less

Due after 1 Year through

5 Years

Due after 5 Years through

10 Years

Due after 10 Years

Due in 1 Year or Less

Due after 1 Year through

5 Years

Due after 5 Years through

10 Years

Due after 10 Years

Cash and cash equivalents ¥ 55,356 $ 675,072 Notes and accounts receivable—trade 82,141 ¥3,405 1,001,720 $41,528 Total ¥137,497 ¥3,405 $1,676,792 $41,528

Please see Note 6 for annual maturities of long-term debt and Note 13 for obligations under finance leases.

15. DERIVATIVESThe azbil Group enters into foreign currency forward contracts to

hedge foreign exchange risk associated with trade receivables and payables denominated in foreign currencies.

It is the azbil Group’s policy to use derivatives only for the purpose of reducing market risks associated with assets and liabilities, not to hold or issue derivatives for speculative or trading purposes.

Since all of the azbil Group’s foreign currency forward contracts

are related to qualified hedges of underlying business exposures, market gain or loss risk in the derivative instruments is effectively offset by opposite movements in the value of the hedged assets or liabilities.

Because the counterparties to these derivatives are limited to major international financial institutions, the azbil Group does not anticipate any losses arising from credit risk.

Derivative transactions entered into by the azbil Group have been made in accordance with internal policies which regulate the authorization and credit limit amounts.


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Millions of yenMarch 31, 2012 March 31, 2011

Contract Amount

Contract Amount Due after One Year

FairValue

Unrealized Loss

Contract Amount


Fair Value

Unrealized Loss

Foreign currency forward contracts:Selling U.S. dollars ¥614 ¥(19) ¥(19) ¥738 ¥ (7) ¥ (7)Selling KR won 64 (6) (6) 142 (8) (8)Buying JP yen 2Buying U.S. dollars 307 4 4 216 (14) (14)

Thousands of U.S. dollarsMarch 31, 2012

Contract Amount


FairValue

Unrealized Loss

Foreign currency forward contracts:Selling U.S. dollars $7,488 $(228) $(228)Selling KR won 786 (78) (78)Buying JP yen 26Buying U.S. dollars 3,746 47 47

Derivative Transactions to Which Hedge Accounting Is AppliedMillions of yen Thousands of U.S. dollars

March 31, 2012 March 31, 2011 March 31, 2012

Hedged Item Contract Amount

Contract Amount Due

after One Year

Fair Value

Contract Amount

Contract Amount Due

after One Year

Fair Value

Contract Amount

Contract Amount Due

after One Year

Fair Value

Foreign currency forward contracts—Selling U.S. dollars

Accounts payables ¥47 ¥1 ¥47 ¥(1) $570 $17

The fair value of derivative transactions is measured at the quoted price obtained from the financial institution.The contract or notional amounts of derivatives which are shown in the above table do not represent the amounts exchanged by the parties and

do not measure the azbil Group’s exposure to credit or market risk.


16. COMMITMENT AND CONTINGENT LIABILITIESAt March 31, 2012, the azbil Group had the following contingent

liabilities:

Thousands of Millions of yen U.S. dollars

Guarantees and similar items of loans ¥11 $135

17. COMPREHENSIVE INCOME The components of other comprehensive income for the year ended March 31, 2012, were as follows:


Unrealized gain on available-for-sale securities:

Gains arising during the year ¥ 31 $ 372 Reclassification adjustments to profit or loss 26 318Amount before income tax effect 57 690Income tax effect 266 3,247

Total ¥ 323 $ 3,937 Deferred loss on derivatives under hedge accounting—Gains arising during the year $ (1)Foreign currency translation adjustments—Adjustments arising during the year (238) (2,904)Total other comprehensive income ¥ 85 $ 1,032

The corresponding information for the year ended March 31, 2011, was not required under the accounting standard for presentation of comprehensive income as an exemption for the first year of adopting that standard and not disclosed herein.

18. SUBSEQUENT EVENT Appropriation of Retained Earnings

The following appropriation of retained earnings at March 31, 2012, was approved at Azbil’s shareholders meeting held on June 26, 2012:

Thousands of Millions of yen U.S. dollars

Year-end cash dividends, ¥31.5 ($0.38) per share ¥2,326 $28,371

19. SEGMENT INFORMATIONUnder ASBJ Statement No. 17, “Accounting Standard for Segment

Information Disclosures” and ASBJ Guidance No. 20, “Guidance on Accounting Standard for Segment Information Disclosures,” an entity is required to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available and such information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.


(1) Description of Reportable Segments The reportable segments of the azbil Group—identifiable operating segments of the Group’s business structure for which financial information is made separately available—are subject to periodic review by the Board of Directors in order to make decisions on the distribution of management resources and to assess performance. The azbil Group identifies its operating segments using such criteria as business organization, product lines, service content, and markets. This approach results in three separate reportable segments: the building automation business, the advanced automation business, and the life automation business. The building automation business supplies commercial buildings and production facilities with automatic HVAC control and security systems, including products, engineering, and related services. The advanced automation business supplies automation control systems, switches and sensors, and engineering and maintenance services to industrial plants and factories. The life automation business supplies lifeline meters, as well as products and services related to nursing care/health support and emergency alert response services—all of which are intimately connected with the daily lives of the general public.

(2) Methods of Measurement for the Amounts of Sales, Profit (Loss), Assets, Liabilities and Other Items for Each Reportable Segment The accounting policies of each reportable segment are consistent to those disclosed in Note 2, “Summary of Significant Accounting Policies.”

(3) Information about Sales, Profit (Loss), Assets, Liabilities and Other Items:

Millions of yen2012

Reportable SegmentBuilding

AutomationAdvanced

AutomationLife

Automation Total Other Total Reconciliations Consolidated

Sales:Sales to external customers ¥103,400 ¥83,031 ¥32,266 ¥218,697 ¥4,802 ¥223,499 ¥223,499Intersegment sales or transfers 496 1,103 277 1,876 107 1,983 ¥ (1,983)

Total ¥103,896 ¥84,134 ¥32,543 ¥220,573 ¥4,909 ¥225,482 ¥ (1,983) ¥223,499Segment profit (loss) ¥ 10,328 ¥ 4,006 ¥ (128) ¥ 14,206 ¥ 143 ¥ 14,349 ¥ (1) ¥ 14,348Segment assets 61,444 61,959 26,681 150,084 2,280 152,364 71,112 223,476Other:

Depreciation 1,023 2,150 845 4,018 9 4,027 4,027Increase in property, plant and equipment and intangible assets 741 1,672 593 3,006 4 3,010 3,010Impairment losses of assets 178 178 178 178

Millions of yen2011


AutomationAdvanced

AutomationLife


Sales:Sales to external customers ¥101,872 ¥80,202 ¥32,248 ¥214,322 ¥4,894 ¥219,216 ¥219,216Intersegment sales or transfers 252 773 373 1,398 229 1,627 ¥ (1,627)

Total ¥102,124 ¥80,975 ¥32,621 ¥215,720 ¥5,123 ¥220,843 ¥ (1,627) ¥219,216Segment profit (loss) ¥ 11,749 ¥ 3,234 ¥ (227) ¥ 14,756 ¥ 144 ¥ 14,900 ¥ (4) ¥ 14,896Segment assets 55,592 58,308 26,196 140,096 2,138 142,234 75,267 217,501Other:

Depreciation 1,209 2,345 890 4,444 16 4,460 4,460Increase in property, plant and equipment and intangible assets 1,059 1,619 659 3,337 14 3,351 3,351Impairment losses of assets 191 54 245 245 245



AutomationAdvanced

AutomationLife


Sales:Sales to external customers $1,260,975 $1,012,569 $393,489 $2,667,033 $58,569 $2,725,602 $2,725,602 Intersegment sales or transfers 6,046 13,449 3,377 22,872 1,301 24,173 $ (24,173)

Total $1,267,021 $1,026,018 $396,866 $2,689,905 $59,870 $2,749,775 $ (24,173) $2,725,602 Segment profit (loss) $ 125,953 $ 48,857 $ (1,556 $ 173,254 $ 1,742 $ 174,996 $ (15) $ 174,981 Segment assets 749,316 755,602 325,384 1,830,302 27,800 1,858,102 867,216 2,725,318Other:

Depreciation 12,470 26,217 10,308 48,995 114 49,109 49,109Increase in property, plant and equipment and intangible assets 9,036 20,386 7,234 36,656 45 36,701 36,701Impairment losses of assets 2,171 2,171 2,171 2,171

Note: Corporate assets of ¥71,112 million ($867,216 thousand) for the year ended March 31, 2012 included in “Reconciliations” mainly consist of cash and cash equivalents and investment securities.

Information on Amortization of Goodwill and Unamortized Balance by Reportable Segment

Millions of yen2012


AutomationAdvanced

AutomationLife


Amortization of goodwill ¥10 ¥1,264 ¥1,274 ¥1,274 ¥1,274Goodwill at March 31, 2012 26 2,578 2,604 2,604 2,604



AutomationAdvanced

AutomationLife


Amortization of goodwill $122 $15,418 $15,540 $15,540 $15,540 Goodwill at March 31, 2012 315 31,447 31,762 31,762 31,762

Information on Profits Resulting from Negative Goodwill by Reportable Segment

Millions of yen2012


AutomationAdvanced

AutomationLife


Profits from negative goodwill ¥197 ¥197 ¥197 ¥197



AutomationAdvanced

AutomationLife


Profits from negative goodwill $2,405 $2,405 $2,405 $2,405

With regard to Advanced Automation business, we acquired the additional shares of the consolidated subsidiary Royal Controls Co., Ltd. to make it a 100% consolidated subsidiary. Accordingly, gain on negative goodwill of ¥197 million ($2,405 thousand) is posted for this consolidated fiscal year.

Related Information(1) Information about Products and Services The information disclosed is identical to the segment information

and is therefore omitted. (2) Information by Region (a) Sales Sales to domestic unaffiliated clients exceed 90% of the sales in

the consolidated statement of income, so this information is omitted.

(b) Property, plant and equipment The value of domestic property, plant and equipment exceeds

90% of the value of the property, plant and equipment on the consolidated balance sheet, so this information is omitted.

(c) Information about major customers No clients accounted for more than 10% of sales in the

consolidated statement of income, so this information is omitted.



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)


Company Name

Headquarters

Founded

Incorporated

Paid-in Capital

Factories, R&D and Business Centers

Employees

Azbil Corporation

Tokyo Building, 2-7-3 Marunouchi, Chiyoda-ku, Tokyo 100-6419, Japan

December 1, 1906

August 22, 1949

¥10,522,716,817

Fujisawa Technology Center, Shinagawa Business Center, Shonan, Isehara and Hadano Factories

5,185 (consolidated basis: 8,331) (As of March 31, 2012)

Japan

Azbil Trading Co., Ltd. *Tokyo, JapanOwnership: 100%

Azbil Yamatake Friendly Co., Ltd.Kanagawa, JapanOwnership: 100%

Azbil Care & Support Co., Ltd. *Tokyo, JapanOwnership: 100%

Azbil SecurityFriday Co., Ltd.Kanagawa, JapanOwnership: 85%

Hara Engineering Co., Ltd.Kanagawa, JapanOwnership: 100% owned by Azbil Trading Co., Ltd.

Azbil Kimmon Co., Ltd. *Tokyo, JapanOwnership: 100%

Azbil Kimmon Aomori Co., Ltd. *Aomori, JapanOwnership: 100% owned by Azbil Kimmon Co., Ltd.

Azbil Kimmon Wakayama Co., Ltd. *Wakayama, JapanOwnership: 100% owned by Azbil Kimmon Co., Ltd.

Azbil Kimmon Shirakawa Co., Ltd. *Fukushima, JapanOwnership: 99.3% owned by Azbil Kimmon Co., Ltd.

Azbil Kimmon Shirasawa Co., Ltd. *Fukushima, JapanOwnership: 100% owned by Azbil Kimmon Co., Ltd.

Azbil Kimmon Aizu Co., Ltd. *Fukushima, JapanOwnership: 100% owned by Azbil Kimmon Co., Ltd.

Azbil Kimmon Haramachi Co., Ltd. *Fukushima, JapanOwnership: 100% owned by Azbil Kimmon Co., Ltd.

Azbil Kimmon Karatsu Co., Ltd. *Saga, JapanOwnership: 100% owned by Azbil Kimmon Co., Ltd.

Azbil Kimmon Engineering Co., Ltd. *Kanagawa, JapanOwnership: 100% owned by Azbil Kimmon Co., Ltd.

Azbil Kyoto Co., Ltd. *Kyoto, JapanOwnership: 100%

Azbil RoyalControls Co., Ltd. *Tokyo, JapanOwnership: 100%

Azbil Taishin Co., Ltd. *Nagano, JapanOwnership: 50%

Tem-Tech Lab.Tokyo, JapanOwnership: 25%

Overseas

Azbil Korea Co., Ltd. *Seoul, KoreaOwnership: 100%

Azbil Taiwan Co., Ltd. *Taipei, TaiwanOwnership: 100%

Azbil Kimmon Technology Corporation *Miaoli, TaiwanOwnership: 51% owned by Azbil Kimmon Co., Ltd.

Azbil Vietnam Co., Ltd. *Hanoi, VietnamOwnership: 100%

Azbil India Pvt. Ltd. *Mumbai, IndiaOwnership: 99.9%

Azbil (Thailand) Co., Ltd. *Bangkok, ThailandOwnership: 99.9%

Azbil Philippines Corporation *Makati, PhilippinesOwnership: 99.9%

Azbil Malaysia Sdn. Bhd. *Kuala Lumpur, MalaysiaOwnership: 100%

Azbil Singapore Pte. Ltd. *SingaporeOwnership: 100%

PT. Azbil Berca Indonesia *Jakarta, IndonesiaOwnership: 55%

Azbil Control Instruments (Dalian) Co., Ltd. *Dalian, ChinaOwnership: 100%

Azbil Information Technology Center (Dalian) Co., Ltd.Dalian, ChinaOwnership: 100%

Yamatake Environmental Control Technology (Beijing) Co., Ltd. *Beijing, ChinaOwnership: 100%

Azbil Control Solutions (Shanghai) Co., Ltd. *Shanghai, ChinaOwnership: 100%

Shanghai Azbil Automation Co., Ltd. *Shanghai, ChinaOwnership: 60%

Azbil Hong Kong Limited *Hong Kong, ChinaOwnership: 100%

Yamatake Automation Products (Shanghai) Co., Ltd. *Shanghai, ChinaOwnership: 100%

Azbil North America, Inc. *Phoenix, AZ, U.S.A.Ownership: 100%

Azbil BioVigilant, Inc. *Tucson, AZ, U.S.A.Ownership: 97.9%

Azbil Brazil LimitedSao Paulo, BrazilOwnership: 99.9%

Azbil Europe NV *Zaventem, BelgiumOwnership: 100%

Four other affiliates

(Establishment/capital participation scheduled in fiscal year 2012) Azbil Saudi Arabia Limited Beijing YTYH Intelli-Technology Co., Ltd. CECEP Building Energy Management Co., Ltd.

Subsidiaries and Affiliates (* mark denotes consolidated subsidiary)


Corporate Data/Subsidiariesand Affiliates

As of April 1, 2012

Corporate Data

Total Number of Authorized Shares

Shares of Common Stock Issued

Shareholders

Fiscal Year

Annual Shareholders’ Meeting

Stock Listing

Transfer Agent

279,710,000

75,116,101

11,808

April 1 to March 31

June

Tokyo Stock Exchange, 1st Section (6845)

Mizuho Trust & Banking Co., Ltd.

Composition of Shareholders

Major Shareholders (Top 10)

Number of Shares Held Percentage of Total (Thousands) Investment

The Master Trust Bank of Japan, Ltd. 7,028 9.51

Meiji Yasuda Life Insurance Co. 5,214 7.05

Japan Trustee Services Bank, Ltd. 5,061 6.85

Japan Trustee Services Bank, Ltd. (Trust Account 9) 4,332 5.86

Nippon Life Insurance Co. 2,669 3.61

Trust & Custody Services Bank, Ltd. (trustee for Mizuho Trust & Banking Co., Ltd. Retirement Benefit Trust Account) 2,315 3.13

Northern Trust Company (AVFC) Sub Account British Client 2,082 2.81

The Nomura Trust and Banking Co., Ltd. (Trust Accounts) 1,868 2.53

Deutsche Securities Inc. 1,459 1.97

Mizuho Corporate Bank, Ltd. 1,404 1.90

(Thousands)

4,000

3,000

2,000

1,000

0

20,000

15,000

10,000

5,000

0

(Yen)

2007/4 2007/9 2008/9 9/90023/8002 9/01023/9002 3/21029/11023/0102 2011/3

0

5000

10000

15000

20000

0

1000

2000

3000

4000

0

5000

10000

15000

20000

0

1000

2000

3000

4000

Trading volume (right scale)Closing price of Azbil shares (left scale) TOPIX (left scale)

0

15

30

0

1

2

2007 2009 2010 2007 2009 20102007 2009 2010

0

10

20

2008 20110

30

24

18

12

6

0

20

16

12

8

4

Price–Earnings Ratio

2008 20110

0.5

1.0

1.5

2.0

Price–Book Value Ratio

2008 2011

Price–Cash Flow Ratio

0

15

30

0

1

2

1.31.2

25.9

19.2

13.2

1.7

1.0

14.7

12.210.8

13.6

9.0

19.015.9 1.0

9.0

14.7

(Times) (Times) (Times)

(FY) (FY) (FY)

Trends in Share Price and Trading Volume

Equity position is calculated excluding treasury stock (1,261 thousand shares)

Stock InformationAs of March 31, 2012



azbil Group Website

http://www.azbil.com/

ContactPublic Relations Section, Corporate Planning DepartmentAzbil CorporationTEL 81-3-6810-1006　FAX 81-3-5220-7274

https://www.azbil.com/contact/index.html

Editor’s Afterword: What is the azbil report?As an important tool for the azbil Group in communicating with stakeholders, the azbil report combines the Group’s annual and CSR reports into a single volume to enable deeper understanding of its business activities.

　We edit the report to provide readers with an easy-to-understand overview of our approach to the environment and society, the initiatives we are taking through our businesses, and the challenges we face.

　We believe that the azbil report is an important means for communicating with our many stakeholders. We welcome feedback, questions or concerns from our readers.

Issued: August 2012

Next scheduled release: August 2013

PR-2101E（1208-1.5K-LCI）

Azb

il Corp

oration

Documents

azbil report 2012